Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Oral Answers to Questions — TRADE AND INDUSTRY

Steel Industry

Mr. Strang: asked the Secretary of State for Trade and Industry if he has any plans to meet the chairman of the British Steel Corporation to discuss future investment in the industry; and if he will make a statement.

The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. Paul Channon): I shall be meeting the chairman designate, Mr. Scholey, on 17 March for a general discussion.

Mr. Strang: Is the Secretary of State aware that the closure of Gartcosh has shaken the confidence of the Scottish people in the commitment of the Government and the Conservative party to the long-term future of the steel industry in Scotland? I welcome last week's announcement of the computerisation of the Dalziel plate mill, but much more investment is required at Dalziel. We are also anxious that an early go-ahead should be given to new coke ovens at Ravenscraig. We also need a new cold-rolling mill facility if Gartcosh is to remain closed. The Secretary of State may be unable to respond positively to all of these points, but will he at least be prepared to meet the Scottish group of Labour Members of Parliament to discuss the issue?

Mr. Channon: I note what the hon. Gentleman says. I do not think that there would be much point in my meeting him and his colleagues about the future of Gartcosh, because that has been settled. It would be raising false hopes to discuss that matter again, because there is no prospect of the decision being changed. However, I am always anxious and willing to see the hon. Gentleman and his hon. Friends about any other matters that they may wish to discuss with me.

Mr. Michael Forsyth: Does my right hon. Friend agree that Opposition Members, who only a matter of weeks ago were telling us that Dalziel would be closed, should recognise that the investment that is being made in the Scottish steel industry is possible only because of the closure of Gartcosh and because the British Steel Corporation is able to target resources where they are most productive? However, when my right hon. Friend meets the chairman designate of the British Steel Corporation, will he ask him to put every effort into creating jobs in small businesses at the Gartcosh site, as the BSC has done so successfully elsewhere in Scotland?

Mr. Channon: I shall certainly raise that matter with the chairman designate of the British Steel Corporation. I am grateful to my hon. Friend for his comments. The House knows that the BSC has recently announced board approval for an investment of £2·5 million at Dalziel. I hope that that news is welcomed by the House.

Mr. James Hamilton: Does the Secretary of State recognise that there is great fear in the Motherwell constituency about the closure of Gartcosh, because of the effect on Ravenscraig? Does he recognise that an investment of £90 million in coke ovens is urgently required and desired? Will he further note that £400 million is being spent on steel plants in England and Wales? That means that the people at Ravenscraig feel that unless something sensational happens the Ravenscraig plant will be the next to close. Will the Secretary of State confirm that that is not the view of the Government? It has always been conceded that Ravenscraig is a matter upon which the Government will have to take a decision.

Mr. Channon: I have nothing to add to what the Government have already said about the future of Ravenscraig. The position remains unchanged. I hope that that is of some comfort to the hon. Gentleman. I hope also that the hon. Gentleman has noted that the BSC plans to spend £15 million on coal injection and other projects at Ravenscraig.

Mr. Crowther: In view of the serious consequences that arose from the undercapitalisation of Sheffield Forgemasters, is the Secretary of State satisfied that the resources being put into Phoenix 2 through the BSC will be adequate to meet all future investment that is needed, including the urgent need for new continuous casting facilities at Rotherham?

Mr. Channon: I hope and think that is so. We shall certainly keep in close touch with the situation.

Mr. Williams: Looking at the investment in the context of the new EEC regime for steel, were not the Government either naive or inept—or perhaps naive and inept—in agreeing to end direct state aid for steel while failing to do anything at all about indirect aid? Does the Secretary of State realise that the result is that the BSC, which receives £1 a tonne of direct assistance, will have to compete directly with Italian producers, who receive £6 a tonne, and with French and German producers, who receive £8 a tonne? Since concurrently the EEC has ended the minimum pricing regime, does that the not mean that the BSC will have to compete at an enormous disadvantage and find that it is incredibly difficult to finance its future investment needs?

Mr. Channon: No. The right hon. Gentleman is probably overstating his case. I do not think that that is the position. The Commission is taking a close interest in these problems, and naturally we will encourage it to continue to do so. It will monitor the position. There is every prospect of the BSC meeting the forecasts. That should be a major cause for congratulating the BSC, considering the difficult position that it has faced over the years.

Manufacturing Industry

Mr. Knox: asked the Secretary of State for Trade and Industry what is the most recent figure for output in manufacturing industry; and how this compares with the figure for the same month six years ago.

The Minister of State, Department of Trade and Industry (Mr. Peter Morrison): In the fourth quarter of 1985 the index of production for manufacturing industry stood at 105, based on 1980 equal to 100. This is 5 per cent. lower than for the corresponding period of 1979. However, between 1981 and 1985 manufacturing output rose by 11 per cent.

Mr. Knox: Does my hon. Friend not find it alarming that the output of manufacturing industry is lower today than it was six years ago? Why does he think that has happened?

Mr. Morrison: Yes, I find it alarming, but my hon. Friend will have heard what happened between 1981 and 1985, when we had great successes in manufacturing industry.

Mr. Norman Atkinson: Is the Minister aware that in the same period, when there was a production output drop of 5 per cent., there was a reduction in the work force of 22 per cent. or just short of 1,500,000 people? Should he not now pay tribute to the work force for having achieved such high output and production when wage levels have fallen by 18 per cent. over the same period?

Mr. Morrison: I certainly pay tribute where there have been significant productivity improvements. As the hon. Gentleman will be aware, productivity in manufacturing since 1980 has increased by 29 per cent., which is a great tribute to many people, including the work force.

Mr. Brandon-Bravo: Does my hon. Friend agree that some aspects of our regional policy have merely transferred jobs in manufacturing from one part of the country to others where there are fewer manufacturing jobs? Will he reconsider the position in my constituency, where two major engineering companies have lost labour to smaller units in south Wales and the north-east? Surely that cannot be practical politics.

Mr. Morrison: I do not know the precise position about the two companies to which my hon. Friend referred, but I assure him that we consider the matter extremely carefully. I hope he will agree that the direction of regional policy to areas of high unemployment is right.

Mr. James Lamond: Is the Minister aware that he can help manufacturing industry, especially the textile industry, by ensuring that a good, strong, protective multifibre arrangement mandate is given to those who are negotiating on our behalf?

Mr. Morrison: Yes, I am aware of that, and I have great confidence in my hon. Friend the Minister for Trade. I am also aware that since 1979 some £7·3 billion has gone into manufacturing as a whole. That confirms the Government's commitment to it.

Mr. Beaumont-Dark: Does my hon. Friend accept that we are all pleased to see that the figures for manufacturing output are increasing, not least in Austin Rover and the Land Rover group? Although he has said that they may not expect any favours, does he agree that

they may at least expect fairness, so that Britain can continue with a high manufacturing output for the good of the nation?

Mr. Morrison: As my hon. Friend knows, my right hon. Friend the Secretary of State and I have paid tribute to the great strides which have been made throughout the whole of British Leyland.

Mr. John Smith: I congratulate the Minister on having the courage to be one of the few Ministers to come to the Dispatch Box and admit that the fall in manufacturing output during the past six or seven years of Conservative government is alarming. What do the Government propose to do to change that alarming position? When will we see manufacturing output rise to the level which the Government inherited all those years ago and all that North sea oil ago?

Mr. Morrison: The right hon. and learned Gentleman quoted me a little out of context, but I am grateful to him for the compliment. I pointed out the figures between 1981 and 1985, which showed a significant improvement. I am sure he will have noticed that there is enormous confidence by international and domestic investors in terms of the stock exchange—[Interruption] That is correct. It is investing in the future of Britain's manufacturing sector.

Airbus

Mr. McCrindle: asked the Secretary of State for Trade and Industry if he has yet been approached by British Aerospace for financial assistance in the development of the proposed new Airbus project known as A330 and A340.

Mr. Channon: There have been preliminary discussions between my Department and British Aerospace about the proposed new Airbus programmes. Though British Aerospace has indicated that it would expect in due course to apply for Government launch aid in respect of these programmes, no formal application has yet been received.

Mr. McCrindle: If we are to sustain a viable aircraft manufacturing capacity in Britain, is there not a strong argument in favour of responding favourably to such an approach from British Aerospace should it be forthcoming, not least because Germany appears all too eager to take the place of Britain in the Airbus project? As we have already invested a substantial sum in the A320, should we not offer to British and international airlines an opportunity to buy an Airbus product straight across the board, as they can at the moment from Boeing and McDonnell Douglas?

Mr. Channon: I have not closed my mind to that prospect, but I am sure my hon. Friend will agree that British Aerospace will have to show that the project will be economically viable, that it will achieve a commercial rate of return, that Government support is essential to supplement its financial resources, and, indeed, that it has tried to obtain private finance.

Mr. Carter-Jones: I assure the Secretary of State that we are all grateful for the fact that preliminary discussions have taken place, but when the submission comes in will he make sure that we have some positive action quickly, because we lost orders on the A320, despite its success, and the A330 and A340 have a high element of British parts?

Mr. Channon: I note what the hon. Gentleman says, but he cannot expect me to approve an application that has not yet been received.

Mr. Robert Atkins: Does my right hon. Friend know that in a conversation that a number of his colleaues had last week with Franz Josef Strauss, the chairman of the board of Messerschmidt-Bolkow-Blohm, he made it clear that he wanted Britain to be in on the development of the A330 and the A340 and that, if we did not make a decision by the end of the year, he would try to allocate our share to European companies which were interested, and that would be a disaster for the British aviation industry?

Mr. Channon: Yes, I heard that report. We are only in March, so there is plenty of time. I shall await the application from British Aerospace. If it wants to make one, it will be judged against the criteria that I have outlined.

Mr. Park: Why does the Minister need the case proving all over again? Surely it was proved in the case of the A320, which is selling because of its high technology. Is it just a reflection of the fact that he is new to the job?

Mr. Channon: No. It is a reflection of the fact that no one has made an application to me.

Mr. Warren: Before my right hon. Friend receives the submission, will he consider the need to get from the Airbus industry proper accounts as to how its business operates, how it disposes of its money and what is the cost of producing its aeroplanes?

Mr. Channon: Yes. My hon. Friend raises three important points.

Mr. Geoffrey Robinson: Is the Secretary of State aware that we accept that no formal application has yet been made, but he has erected a formidable series of hurdles for British Aerospace to overcome? Will he, in particular, confirm that although some money from private sector finance may be available, Government support will be inevitable if the programme is to get off the ground? Will he make it clear to the House today that he is not in principle opposed to public support for this important programme?

Mr. Channon: The House would think it most unreasonable if I gave an answer to an application that I had not yet received. In the unlikely event of the hon. Gentleman holding my office, he would do the same.

Manufacturing Industry

Mr. Lightbown: asked the Secretary of State for Trade and Industry what is his forecast for manufacturing output in 1986.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher): A new forecast for the increase in manufacturing output between 1985 and 1986 will be published in the Industry Act forecasts at the time of the Budget next week. The recent CBI industrial trends survey suggests that short-term prospects for manufacturing output can be viewed optimistically.

Mr. Lightbown: While welcoming that forecast, may I ask my hon. Friend to confirm that that would give industry its longest sustained period of growth since 1971? Can he give me some idea of the areas of growth?

Mr. Butcher: There is clear evidence that the manufacturing sector is enjoying sustained growth and a trend of increased output. I know that my hon. Friend is a great expert in such matters. Last year, within the growth in manufacturing output, the mechanical engineering sector, which is at the heart of manufacturing, increased its output by 6 per cent. That was a magnificent achievement, and I should have thought that Opposition Members would join us in celebrating that recovery.

Mr. Ashdown: Is it true that no amount of projected growth in manufacturing output will make good the devastation caused to the industrial base since 1979, that during the past 10 years Britain has lost for ever one sixth of its industrial base, and that British manufacturing has lost 1·7 million jobs? In the light of those figures, why do the Government have no strategy for the regeneration of British industry?

Mr. Butcher: The hon. Gentleman posed his question in the context of the past 10 years. Therefore, he will agree that it is highly significant that between 1973 and 1979 productivity in the manufacturing sector increased by the appalling figure of only 4 per cent. That was an awful legacy with which to enter the world recession. By contrast, between 1979 and 1985 productivity increased by more than 30 per cent. In reply to the hon. Gentleman's philosophical question, I should say that, as a trading nation, we must manufacture goods to survive.

Mr. Sackville: Is my hon. Friend aware that a high proportion of manufacturing output in Bolton and its surrounding areas depends on the textile industry and that jobs and future investment are at risk in the absence of an orderly development of the world textile trade through a strong multi-fibre arrangement?

Mr. Butcher: My hon. Friend will be aware that my hon. Friend the Minister for Trade has been tackling that problem with great vigour in the Council of Ministers in Europe. In due course he will deliver a regime which safeguards our international requirements for free trade, while looking after the legitimate interests of the British textile industry.

Mr. Pike: Does the Minister accept that his answers this afternoon reflect the Government's complacent attitude to manufacturing industries? Will he assure the House that the Government will take steps to encourage the growth of our manufacturing industries? Will they also encourage a "Think British" campaign aimed at consumers buying products in the market?

Mr. Butcher: On many occasions I and my colleagues have urged British consumers to take another look at British products. It is interesting that those who complain the most about the performance of British industry search the least to find well-designed British products, which are coming on to the market and which are tackling the inroads that imports have made into our economy. Much of the decision-making process lies legitimately with our consumers, who should do precisely what the hon. Gentleman recommends.

Mr. Hanley: Does my hon. Friend agree that the recent performance in manufacturing production and the creation


of greater confidence in the manufacturing world has released funds from the private sector and from abroad, and that the demand for dependence on Government money, about which we hear so much from the Labour party, is largely brought about from nostalgia, a desire for state power, or a deliberate ignorance of our own success?

Mr. Butcher: Sometimes when I listen to the arguments from the Labour Benches I cannot help but think that those arguments have more to do with an affection for public funding of any description than with anything else. Therefore, their philosophical preoccupations are more important to them than are the practical requirements of industrial policy.

Mr. Williams: Does the Minister agree with his hon. Friend the Minister of State that the fall in manufacturing output under this Government has been alarming?

Mr. Butcher: My hon. Friend and I celebrate the fact that at long last we have a period of growth that has not been funded by inflation or by bogus demand management.
The right hon. Gentleman asked whether it was alarming. The answer is no, it is not alarming, to the extent that the trends are moving in the right direction.

Cornish Tin Mining Industry

Mr. Harris: asked the Secretary of State for Trade and Industry if he will make a further statement on the future of the Cornish tin mining industry.

Mr. Peter Morrison: We are monitoring closely the effects of recent developments on the Cornish tin industry. My Department is in touch with the mining companies in Cornwall. We will be willing to consider carefully assisting viable projects to make the mines competitive in the new market situation.

Mr. Harris: The Cornwall tin mining industry has drawn some hope from the replies given yesterday by my right hon. Friend the Prime Minister in answer to the hon. Member for Truro (Mr. Penhaligon), which were echoed by the statement that my hon. Friend has made just now. Does my hon. Friend accept that there is considerable concern about the Government's apparent line that we shall have to wait until the market stabilises before coming to any decision, because that could well mean that we would be too late?

Mr. Morrison: I accept what my hon. Friend says relating to concern about any delay. That is why my right hon. Friend the Prime Minister and I have said on several occasions that we would wish to expedite any official proposition from any of the tin mines in Cornwall. I hope that he will agree that the viability test must be properly looked into.

Mr. Skinner: Does the hon. Gentleman recall that when another precious metal was in difficulty less than a couple of years ago the Government decided to use about £100 million of taxpayers' money to bail it out? I am referring to the gold bullion dealers Johnson Matthey. Why is it that the Government, when it comes to tin miners, unlike bankers, decide that they cannot do anything at all about the problem? Why cannot they use some of the taxpayers' money, not just to bail out, but to take over those tin mines and nationalise them so that jobs can be safeguarded?

Mr. Morrison: The hon. Gentleman will appreciate that, whether nationalised or not—I would be opposed to nationalisation—the future viability of the tin mines will depend upon the cost of production and the market price at which they can sell that production.

Mr. Penhaligon: What does the Minister believe a stabilised tin maket looks like?

Mr. Morrison: Something totally different from the present position, when we do not know what the price is.

German Insurance Market

Mr. Ottaway: asked the Secretary of State for Trade and Industry whether he is satisfied with United Kingdom firms' access to the German insurance market.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Michael Howard): No, Sir. In common with most other member states of the European Community, Germany imposes restrictions on trade in insurance services which we do not consider to be justified. We regard removal of these restrictions as an important element in the Community's programme for the completion of the internal market.

Mr. Ottaway: Is it not deplorable that a citizen in a non-United Kingdom Common Market country cannot place an insurance policy in London? Is that not contrary not only to the spirit of the Common Market but to the treaty of Rome?

Mr. Howard: I agree with my hon. Friend. All Community members, except the Netherlands, impose restrictions on the writing of insurance service business across national frontiers, but the Commission has brought cases in the European Court of Justice against four member states that impose such restrictions. We hope that the judgment of the Court will open the way to the continuing genuine freedom of trade in insurance services, to which we consider member states are entitled under the treaty.

Mr. Fallon: Would a common market in insurance effectively add a 5 per cent. tax to household, car and life premiums in this country? Will my hon. and learned Friend undertake to make the creation of a common insurance market a top priority during the forthcoming British presidency?

Mr. Howard: We certainly intend to do all that we can to remedy the situation, and to obtain further progress towards the creation of an internal common market to include a common market in insurance services.

Mr. Gould: Why should we be compelled, week in and week out, to comply with EEC rules which govern a free market in goods from which we often suffer a disadvantage, when our EEC partners, in particular the Germans, have got away with 15 years of foot-dragging in the one area where we might be expected to derive benefit? Is it not time that the Minister and the Government stopped talking and demanded effective action?

Mr. Howard: The matter is now before the court. When the court's decision is made known we shall take action.

Mr. Lyell: How many of the 320 internal barriers to trade in the Common Market are in the financial services sector? Will my hon. and learned Friend keep a chart on his wall and tick them off one by one?

Mr. Howard: The answer to the first part of my hon. and learned Friend's question is too many. I shall adopt his suggestion about the chart and try to reduce the number as speedily as possible.

Fleet Support Vessels

Mr. Millan: asked the Secretary of State for Trade and Industry what discussions he has had with British Shipbuilders about its Fleet Support King design of fleet support vessels.

Mr. Peter Morrison: The chairman, Graham Day, has kept my right hon. Friend fully informed of the development of the Fleet Support King design, and of its potential on the home and export markets.

Mr. Millan: Will the Minister applaud the initiative of British Shipbuilders in developing this design, which would be built in merchant yards—the depressed sector of the industry at the moment — and specifically at shipbuilders in Govan and Sunderland,,? The design is excellent and will give an economic solution to certain naval requirements. Will the Minister do something to get a more positive response than we have had so far from the Ministry of Defence, because support from that Ministry would be important in obtaining orders from foreign navies?

Mr. Morrison: I agree with the right hon. Gentleman about applauding the design originating from British Shipbuilders. I understand the right hon. Gentleman's points about Govan and Sunderland, but it would be for British Shipbuilders to make up its own mind eventually. I am sure that my right hon. Friend the Secretary of State for Defence will read carefully what the right hon. Gentleman said in the other part of his question.

Mr. Clay: Will the Minister accept that it is not good enough to say that his colleague in the Ministry of Defence will read carefully what my right hon. Friend has to say? We always hear from the Government, and particularly from Trade and Industry Ministers, that the problems in shipbuilding have to do with the world recession. They make every excuse, as long as it has nothing to do with the Government. These orders are directly in the gift of the British Government. Is the Minister aware that the first Stena ship floats out of the Pallion yard in my constituency today, that the second goes out in June, that the crane ship leaves North sands in August, and that after that there are no more orders in Sunderland Shipbuilders' yards? Is the Minister aware that over 2,000 jobs could be saved if the Ministry of Defence gets off its backside and places these orders? Will the Minister have words with his colleagues in the Ministry of Defence today and tell them that these jobs are urgently needed in my constituency and in the constituency of my right hon. Friend the Member for Glasgow, Govan, (Mr. Millan)?

Mr. Morrison: I am aware, of course, that the difficulties in the shipbuilding market are quite intense. I am also aware that, thanks to the enormous strides that have been made by the management and the work force, British Shipbuilders is far more competitive than hitherto.

I am sure that the question that the hon. Gentleman put to me today is one that he put to my right hon. Friend the Secretary of State for Defence yesterday. That matter is my right hon. Friend's responsibility.

Mr. Gordon Brown: In the Minister's discussions with British Shipbuilders about the future work load at Govan and at other yards, what practical initiatives has he considered to secure foreign and merchant orders as well as defence orders to save the 5,000 jobs in British Shipbuilders that are at risk in the coming year?

Mr. Morrison: The hon. Gentleman will be aware that the management and chairman of British Shipbuilders go overseas to seek the orders which the hon. Gentleman would like, which will ensure that those jobs are preserved.

British Design Talent

Mrs. McCurley: asked the Secretary of State for Trade and Industry to what extent his Department is encouraging British companies to make better use of Britain's design talent.

Mr. Butcher: All the Department's design activities, incorporating the promoting of awareness of the importance of design in industry and in the education system, and specific measures to help designers, are aimed in some way at making better use of Britain's great wealth of design talent. The extent of the Department's commitment is illustrated by the fact that we have trebled expenditure on design from £ 4 million in 1982–83 to £12 million in the current year.

Mrs. McCurley: Does my hon. Friend agree that in producing consumer goods in particular, British manufacturers should use designers to greater effect, in view of the fact that there are so many imported goods on the shelves in our shops?

Mr. Butcher: A phenomenon which concerns many people is that so many of our goods, especially consumer goods, are of foreign manufacture. I am delighted to say that out industrialists have woken up to the fact that, by using British design talent, which is the best in the world, they can tackle the huge growth in the range of consumer goods. Currently many British companies do not even begin to address that issue.

Mr. Ewing: Is the hon. Gentleman aware that the Post Office uses British design talent in a different design area —to design its British industry stamp? What is the good of asking British design talent to design a British industry stamp for Industry Year when the Government have tried to sell British Leyland to the Americans, and when Government directors on BP's board connived in the selling of the BP tanker fleet to the Bahamas?

Mr. Butcher: The design story is as applicable to the making of stamps as it is to the making of cars. Although I commend the design practice that designed those stamps —I visited that company—I also commend BL's design policy. BL made large investments in a huge computer aided design facility. The evidence, now on the roads, shows that its design policy is beginning to pay off.

Inner City Areas

Mr. Tony Lloyd: asked the Secretary of State for Trade and Industry if he will make a statement on his policies for the regeneration of industries in inner city areas.

Mr. Butcher: My Department fully supports and participates in the Government's initiatives in the inner cities, such as the city action teams and the new initiative in the eight inner city areas led by my right hon. and learned Friend the Paymaster General. We are keen to ensure that the inner cities obtain the maximum possible benefit from a number of national and regional schemes in support of industry and commerce operated by my Department.

Mr. Lloyd: How can the hon. Gentleman sound so complacent about the problem when the male adult unemployment rate in and around my constituency is 60 per cent.? Perhaps I should have asked about policies for the reincarnation, rather than the regeneration, of industries. In view of the Government's policy, there is now an industrial desert in our inner city areas. What will the Government do to ensure that there is either public sector or private sector investment in those areas to mop up that great pool of unemployment?

Mr. Butcher: The Government cannot be accused of complacency on inner city programmes. Those programmes are operated by a number of Government Departments. If the hon. Gentleman had done his homework a little better, he would have known that, since the launch of city action teams — they are the main weapon of regional selective assistance—115 companies have been visited by CAT officers in his area with the objective of stimulating RSA applications.

Mr. Lloyd: How many jobs?

Mr. Butcher: To date, 24 applications have been approved and assistance totalling £1,815,000 has been offered. To answer the hon. Gentleman's specific question, that will create 504 jobs and safeguard 21 more.

Mr. Budgen: Does my hon. Friend not understand how deeply disappointing his answer is to those who hear him encouraging central and local government to spend more money? Would it not be better if my hon. Friend emphasised that lower expenditure in the inner city areas will lead to lower taxes, lower rates and thus lower costs, which may help a few manufacturing industries to survive?

Mr. Butcher: Two policies are relevant in answering my hon. Friend's question. First, there is no point in Governments getting involved in inner city programmes if the cities are politically dominated by those who continue to impose massive rate increases. That would be self-defeating. Secondly, it is surely right that, if the Department of Trade and Industry brings its policies into this initiative, it should ensure that the projects it backs are viable, commercial and geared to promoting employment in jobs with a future. To that extent, that level of public expenditure is working with the grain of market forces and not against it.

Mr. Litherland: Is the Minister aware that one of the last major employers in the inner city area of Manchester, Central—GEC Switchgear—has announced that it will

make 300 people redundant and that, in addition, the area has lost 19,000 jobs since the early 1970s? One of the reasons for that is that our industry cannot compete with foreign competitors, which receive advantageous credit and subsidies from their Governments. When will the Government do something for British industry?

Mr. Butcher: If the hon. Gentleman examines the Government's support for that type of major contract business, certainly in terms of export support, he will find that we have a good record. I appreciate that the hon. Gentleman was speaking about another GEC company, but I am sure he will have noticed that GEC Traction at Trafford Park has secured an order worth £35 million to provide 31 high-speed locomotives. That is an example of enlightened public purchasing working towards objectives which the hon. Gentleman should share.

European Community (Internal Market)

Mr. Key: asked the Secretary of State for Trade and Industry what progress is being made towards removing the barriers to trade in goods and services within the European Community?

The Minister for Trade (Mr. Alan Clark): A large number of directives concerned with the removal of technical barriers to trade in goods and services have been adopted. Steps have also been taken to simplify the movement of goods between member states.

Mr. Key: Does my hon. Friend agree that it is intolerable that there has been so little progress towards a common market within the European Community? Although, this weekend, our eyes will be on France and Spain, where we hope the voice of the sensible Right will prevail, will my hon. Friend cast his mind forward to the end of June, when Britain assumes the presidency of the Commission? What steps is he taking to smooth the transition and therefore make a proper common market more likely?

Mr. Clark: Certainly progress so far has been disappointing. That is natural in a Council where there are varying interests and opinions. We have agreed an action programme with the Dutch presidency. I shall be chairing the Council — [Interruption.] — for the remaining six months of the year. I hope that, in conjunction with my Dutch colleagues, and the Belgian presidency which follows, we will be able to make more rapid progress in freeing the internal market—an objective that is shared by all member states.

Mr. Tom Clark: Does it not worry the Minister that British Steel has saddled itself with quotas that have led to a two thirds reduction in manpower in the British steel industry since the Government took office? Does it not worry the Minister that men are being made redundant by British Steel while markets are being flooded, especially by the Italians, who seem to pay scant regard to the quotas which this Government are meeting with great enthusiasm?

Mr. Clark: The internal market is not really concerned with quotas, but with barriers to the freer movement of trade, the harmonisation of technical standards, a free internal market in financial services and such matters as my hon. Friend the Parliamentary Under-Secretary of State for Trade and Industry digressed on


regarding insurance. With regard to steel quotas, I understand that an extremely good deal was reached before Christmas.

Mr. Nicholas Winterton: Does my hon. Friend agree that—[Interruption] It is only a matter of time before I move up a little. Does my hon. Friend agree that there would be a better movement of goods and services in Europe if all countries obeyed the same rules? Does he agree that we should take a robust stance on the renewal of the multi-fibre arrangement? As it is so important for employment in the European Community, does he not agree that the Community, including the United Kingdom, is likely to be happy to work together in greater cooperation in that regard?

Mr. Clark: There is a lot in what my hon. Friend says, but the mandate for negotiating the MFA has been agreed on the basis of unanimity. There was nothing particularly contentious in that regard, hut that could have been traded off. I agree that several barriers remain, especially in financial services and insurance. It is in the interests of all member states, including the United Kingdom, that they should be removed as quickly as possible.

Mr. Norman Atkinson: Does the Minister recall describing as inconsistent nonsense the origin of the report that will be before him when he takes the chair of the committee that is to meet shortly? What will his feelings be when that item comes up?

Mr. Clark: I do not recall that phrase, but I should like to pay tribute to the right hon. and hon. Members, who have been very merciful in not reminding me of some of the more intemperate comments that I made before becoming a Minister.

Electronics Industry

Mr. Kenneth Carlisle: asked the Secretary of State for Trade and Industry what financial assistance the Government are providing to the electronics industry for capital investment and product development in the current financial year.

Mr. Butcher: The Department of Trade and Industry's support for research, development and production in the United Kingdom electronics industry during the financial year to date is about £130 million.

Mr. Carlisle: Does my hon. Friend agree that we have the balance right? Is he aware that it is rumoured that some £500 million of support is being asked for for the development of the wing of the new European airbus, but that the electronics industry, which is vital to a far wider range of businesses, is lagging behind? Will he consider a spread of support to industries in technology so that we can be certain to be at the forefront of the electronics industry?

Mr. Butcher: There are two separate heads of account for examining launch aid for projects in the aerospace industry, and the support for innovation account is the most relevant to this question. I am content that we have the balance right in terms of DTI spend when we bear in mind that support for innovation was running at roughly £90 million in 1979 and that it is running at roughly £230 million now.

Mr. Dalyell: How do the Government think that the British electronics industry will benefit from the American

strategic defence initiative research'? Before my Consolidated Fund Bill debate at 2.30 on Friday morning, may we know from the DTI whether it was consulted about the visit from the United States of Mr. Clarence Robinson?

Mr. Butcher: On the latter part of the hon. Gentleman's question, I refer him to the reply that my right hon. Friend the Secretary of State for Defence gave yesterday in the House. As for SDI, there are enabling technologies, which it is right that we should be involved in. The hon. Gentleman will know of one technology which is close to his area of interest at Heriot-Watt university—light-powered computers. As this is leading edge developmental work, it is right that we should consider the options available to us.

Mr. Peter Bruinvels: Is my hon. Friend aware that both of the electronics companies in my constituency welcome any subsidy, but it is not helpful to them if business rates are now to rise by 80 per cent.? Is there any way in which the subsidies can be reconsidered and pressure put on local authorities to stop slamming the businesses that are providing jobs in the electronics industry in Leicester?

Mr. Butcher: Local authorities which argue that they want a boost in new technologies should give companies a welcome if it is inward investment, or support them on the ground by doing their best, in the interests of job creation and preservation, to keep rate increases down to the absolute minimum.

Mr. Geoffrey Robinson: Is the Minister aware that he is appallingly complacent about the level of Government support for the microelectronics support industry? Is he further aware that since 1981 our level of support has increased only very marginally and that we now have a situation in which France is spending five times as much and Germany nearly twice as much as we are by way of Government support for the microelectronics industry? Does he not find this situation, in which we have a large and growing deficit on information technology, very alarming?

Mr. Butcher: The British information technology industry has a number of key strengths, which this Government are anxious to support. Regarding the level of support, we have not been tardy in coming forward with these programmes. It is significant that this is the first Administration to have created the post of Minister for Information Technology. It is this Administration who have shifted their support towards the new technologies, not only in proportionate terms, but in cash terms.

Leyland Vehicles Ltd.

Mr. Robert Atkins: asked the Secretary of State for Trade and Industry if he will make a statement on the current position of Leyland Vehicles Ltd.

Mr. Channon: As I told the House on 5 March, proposals relating to Leyland Trucks and to Land Rover, Range Rover and Freight Rover are being appraised by the BL board. Discussions in relation to Leyland Bus are taking place over a slightly different time scale from those concerning the other Land Rover-Leyland businesses.

Mr. Atkins: My right hon. Friend will be aware, because I have written to him, that there is some concern about property of a community nature rather than of an


industrial or manufacturing nature in the town of Leyland, which is owned jointly by Leyland Bus and Leyland Trucks. Will he recognise that this community property plays a very great part in the community and that if it is not looked at carefully in the course of these negotiations this would generate hostility to any deal, which would be a pity? Will he look at this as a matter of urgency?

Mr. Channon: I shall ensure that this is looked at. It is primarily a matter for discussion by British Leyland with the interested parties, but I take careful note of what my hon. Friend says and will ensure that the matter is carefully studied.

Mr. Willie W. Hamilton: Does the Minister recall that before Westland was taken over by the Americans the Prime Minister and other Ministers repeatedly said that the workers' wishes must be respected? Can he give the same assurance in respect of the future of Land Rover, that before any irrevocable decision is taken there will be a secret ballot of those workers?

Mr. Channon: What the hon. Gentleman is saying about Westland is not exactly accurate, and I think that is within the recollection of the House. Of course the companies concerned are keeping the work force closely in touch, and I hope that all the usual prcedures will be followed.

Mr. Roger King: Will my right hon. Friend, in his negotiations with whatever interested parties there are for parts of the Leyland empire, pay particularly close attention to the future of an inner city company which is operating at a profit and providing 2,000 jobs for the local community? I refer to Freight Rover, at Washwood Heath in Birmingham. We place a great deal of emphasis on inner city developments and the creation of new businesses. We must ensure that we hang on to what we have and is trading profitably.

Mr. Channon: I know of my hon. Friend's very deep concern on that point. That is something that we shall naturally be considering.

Mr. Sheerman: Was the Secretary of State consulted by the chairman of the Conservative party before he made his extraordinary statements to Jonathan Dimbleby on the weekend television programme and compared the possible Leyland buy-out by American interests with the position of the tractor industry in Britain, which he said was 100 per cent. owned by Americans and no one cared?

Mr. Channon: I am in constant touch with my right hon. Friend and will draw the hon. Member's remarks to his attention.

Mr. Grylls: Will my right hon. Friend give an assurance that the merchant bankers representing Her Majesty's Government in this proposed deal are not restricting the amount of information coming from the team representing the management buy-out for Land Rover that is made available to the House, which could be very serious? Will he do his best to make sure that no such restrictions are placed on the representatives of the buy-out team?

Mr. Channon: I am assured by my advisers that that is not the case. However, in view of my hon. Friend's concern I shall have the matter re-examined.

Mr. Campbell-Savours: May I have an assurance that Mr. Graham Day, the new chairman of BL, who is also

a non-executive director of Lairds, will not be involved when the decision is taken whether Lairds should be allowed to take over Leyland Bus?

Mr. Cannon: As I think the hon. Gentleman knows, the time scale for Leyland Bus is different from that for the other parts of Land Rover-Leyland. I am trying to proceed with that with reasonable expedition—

Mr. Campbell-Savours: May I have an answer to my question?

Mr. Channon: If I am allowed to answer the question, I did say to the House the other day that Mr. Day will take over as chairman when these deals have been concluded.

Mr. Bowen Wells: Will my right hon. Friend confirm that in the consideration of Leyland's future he will not deviate, in spite of the pressure brought to bear on him from xenophobic sources, from his determination to ensure that future commercial health and the jobs involved in Leyland are put at the forefront of his consideration?

Mr. Channon: We are determined that that should be the paramount consideration in the Government's mind. I am sure that that will be the paramount concern of all those who are involved in the negotiations.

Mr. John Smith: The Secretary of State will have seen from the latest figures that Leyland Trucks came top of the league sales in the year just ended. The prospects for the company are very good. Why should we sell the company to its American competitors?

Mr. Channon: The right hon. and learned Gentleman is seriously wrong in his forecast of the future of the truck industry in this country and in Europe. There is massive overcapacity and there are serious worries. The right hon. and learned Gentleman does no service to the work force or any of those involved in the industry by trying to minimise the difficulties or play them down.

European Community (Trade Deficit)

Mr. Teddy Taylor: asked the Secretary of State for Trade and Industry if he will initiate an inquiry into the reasons for the level of the deficit in manufacturing trade with the EEC; and if he will make a statement.

Mr. Alan Clark: The causes of the deficit, which are many and complex, were examined in a report by the Select Committee on Trade and Industry in June 1984.

Mr. Taylor: As the current deficit, which is almost £9 million, is equivalent to the loss to Britain of almost 1 million jobs, does my hon. Friend not feel that this is a matter into which the Government should inquire ex,tremely carefully, especially in view of the effect that this could have on us when oil revenues diminish or cease? Will my hon. Friend be willing to examine the abuses of Britain's trade and the consequential loss of jobs that stem from the operation by Germany of the inner German trade,,_ agreement, which is desperately unfair to Britain and British jobs?

Mr. Clark: I know of my hon. Friend's special concern on matters of German trade, and I have written him a letter on various aspects of it. He is right in saying that there is a problem with inner German trade, and it is something to which we should be giving our attention. The outward processing aspect has already been considered in


the course of arranging the mandate for the renewal of the multi-fibre arrangement, and I think that he will be pleased with the results of that.

Mr. Kennedy: Does the Minister agree with the hon. Member for Southend, East (Mr. Taylor), and others who are critical of our balance of trade position with other member states of the European Community, that one of the major reasons for our unfavourable position is the cut of nearly 20 per cent. in manufacturing investment in Britain since the Government came to office?

Mr. Clark: I do not know whether a cut in manufacturing investment has anything to do with it. However, I am certain that the lack of competitiveness of British goods. which allows such easy penetration of our domestic markets in so many sectors by the products of other member states, is probably at the root of the problem.

Mr. Thurnham: Does my hon. Friend agree that, with the current level of exchange rates, the prospects of increasing our exports to the EEC are better than ever before?

Mr. Clark: Yes, I would hope so. However, it is dangerous to rely solely on the volatility of exchange rates. A lasting improvement will be made only when British goods and services are competitive with the best that Europe offers.

Manufactured Goods

Mr. Canavan: asked the Secretary of State for Trade and Industry what is the latest balance of trade in manufactured goods.

Mr. Butcher: In the context of an overall surplus of £3 billion, there was a deficit on trade in manufactures of £3 billion in 1985.

Mr. Canavan: Will the Minister now tell us the whole truth? Over the past three years there has been an annual average manufacturing deficit of over £3 billion, the worst record in the history of British industry. As it is only North sea oil that is keeping this sinking Government temporarily afloat, is it not about time that the Minister's job description was changed to the "Minister for trade deficits which have arisen from the butchering of British industry"?

Mr. Butcher: The deficit in 1984 was £3·9 billion. I said as candidly as the question demanded, I should have thought, that the deficit in 1985 was £3 billion. The future trend in that set of figures will be addressed when my right hon. Friend the Chancellor of the Exchequer makes his projections in a few days on the future level of output. Within the figures there is another very encouraging figure, that is an 8 per cent. incease in the volume of exported manufactures in 1985.

Research and Development

Mr. Soames: asked the Secretary of State for Trade and Industry if he has any plans to increase the research and development budget of his Department.

Mr. Channon: My Department's research and development budget is forecast to increase from £415 million in 1986–87 to £438 million in 1988–89.

Mr. Soames: I thank my right hon. Friend for that good news. Does he agree that if we are to compete seriously with the Japanese and the Germans we willll have to spend a great deal more money on research and development? May I suggest that for a start he plunders the Ministry of Defence, which has sums of money beyond the dreams of avarice to spend on research and development?

Mr. Channon: I note what my hon. Friend has said. A major increase is already planned in the proportion of my Department's budget for research and development, which will go from 27 per cent. in 1984–85 to 46 per cent. in 1988–89. With increasing company profitability. I hope that the private sector will match that increase.

Mr. Dalyell: On a point of order, Mr. Speaker.

Mr. Speaker: Does it arise out of questions?

Mr. Dalyell: Yes, Mr. Speaker. May I draw your attention to the increasing habit among Ministers of deflecting questions by referring to statements in Hansard and to previous answers which in no way cover the question which was asked? May I draw your attention to columns 793 and 799 in yesterday's Hansard? Answers by the Defence Secretary on the visit of a senior American official—

Mr. Speaker: Order. I do not think that arises out of questions today. The hon. Gentleman correctly drew attention to his good fortune in having drawn the subject for debate under the Consolidated Fund. I think that we should wait until then to hear the answer.

Mr. Dalyell: It is the habit of Ministers, by sleight of ministerial hand, to avoid answering legitimate questions. I asked for a very simple answer to a question—

Mr. Speaker: Order. What is the point of order for me in that? I cannot be responsible for what Ministers say or how they answer questions.

Mr. Dalyell: The point of order has nothing to do with the substance of the particular issue. A legitimate question was asked as to whether the Department knew about the visit—

Mr. Speaker: Order. That is not a matter for me.

Mr. Williams: Further to that point of order, Mr. Speaker. My hon. Friend has a legitimate grievance—

Mr. Speaker: Order. I must say to the shadow Leader of the House that, although his hon. Friend may have a legitimate grievance, it is not a grievance with me. I cannot be responsible for answers which are given from the Front Bench.

Mr. Skinner: Further to that point of order, Mr. Speaker. There is a matter in it for you. If Ministers fail to answer questions quickly and precisely by saying yes or no, and reel out long evasive statements which refer to other matters, they take up time which could be used by other people.

Mr. Speaker: Order. This is taking time out of an important Opposition day.

Indecent Displays (Newspapers)

Ms. Clare Short: I beg to move,
That leave be given to bring in a Bill to make illegal the display of pictures of naked or partially naked women in sexually provocative poses in newspapers.
This is a simple but important measure. I stress that I should like the rule to apply to newspapers and only newspapers. If some men need or want such pictures, they should be free to buy appropriate magazines, but they have no right to foist them on the rest of us.
It is said that we are free not to buy such newspapers, but things are not as simple as that. I have received several letters from women whose husbands buy such newspapers. Those women object strongly to those newspapers and object to them being left lying round the house for their children to see.
I have also talked to teachers, including my brother. He asks children to bring newspapers to school for use in discussing current affairs or for making papier mâché, and so on. Both he and the children are embarrassed by the children's reaction to the page three pictures.
A precedent for my Bill can be found in the Indecent Displays (Control) Act, which provides that public hoardings cannot show such pictures, although they are not illegal when they appear in magazines or when they are seen in private. The same reasoning applies: we should not all be forcibly exposed to them. The argument and precedent are exactly the same.
During the debate on the private Member's Bill introduced by the hon. Member for Davyhulme (Mr. Churchill), I said that I intended to introduce a Bill such as this. Since then I have received about 150 letters from all over the country. About one third of them are from men — [Interruption.] — the vast majority of whom agree with me. Of course, I received some obscene letters from men; and Mr. Murdoch and those Conservative Members who keep shouting out now should know that such people support and defend page three.
The letters came predominantly from women, particularly young women. They stressed time and again that they did not consider themselves to be prudes but objected very strongly to such pictures. One letter came from a young woman who worked in an office. She was writing on behalf of quite a few young women. They considered themselves to be young and attractive, but every day they were subjected to men reading such newspapers in the office, and to them tittering and laughing and, making rude remarks such as, "Show us your page threes then". Such women feel strongly that this Bill should be enacted. [Laughter] . Conservative Members display their attitudes for everyone to see, and will be judged accordingly.
Many of the letters that I received came from mothers with small children who said that they felt that page three undermined their efforts to instil decent attitudes in their children. Many of them commented time and again on the front-page stories of nasty newspapers such as The Sun —[Interruption.] It is the nastiest. Such stories deplore some brutal rape or attack on a child. The reader then turns to page three to see the usual offering.
I agree with the women who think that there is some connection between the rising tide of sexual crime and

page three. Obviously, that is unprovable, but the constant mass circulation of such pictures so that they are widely seen by children must influence sexual attitudes and the climate towards sexuality in our society. Those pictures portray women as objects of lust to be sniggered over and grabbed at, and do not portray sex as something that is tender and private.
When future generations read that in our day about 10 million newspapers carried such pictures every day to be left around and seen by children and by lots of women who did not want to see them, they will see those pictures as symbolic of our decadent society. That is why we should take action to make them illegal.

Mr. Robert Adley: rose—

Mr. Speaker: Does the hon. Gentleman seek to oppose the Bill?

Mr. Adley: Yes, Mr. Speaker.
The hon. Member for Birmingham, Ladywood (Ms. Short) is a prominent supporter of women's rights and her speech was a titillating mixture of politics, prejudice and prurience. It is barely credible that she should come before the House today with such a proposal. Why is she proposing that only pictures of women should be outlawed? Should we not outlaw cheesecake pictures of men? The hon. Lady is clearly proposing to introduce a very sexist measure. Where are we supposed to draw the line?
Writing about her Bill in The House Magazine, the hon. Lady refers to
partially naked women in sexually provocative poses in newspapers".
The italics are hers, I imagine. It is fascinating to consider who will decide whether a woman is or is not partially naked, and whether her pose is or is not sexually provocative.
The hon. Lady referred to The Sun and to Mr. Murdoch. I noticed that she did not refer—it happened by sheer chance, I am sure—to the Daily Mirror. To make sure that I did my job properly in opposing the Bill, I had a look at The Sun and the Daily Mirror today. I am not sure which of these newspapers would fall foul of the hon. Lady's strictures. Perhaps it is only newspapers owned by Australians, or perhaps by ex-Labour Members of Parliament who are now capitalists.
The hon. Lady does less than justice to her fellow citizens. She would have our newspapers resembling Pravda. That would be more in keeping with some of her own political views. Where do we go from here? When the hon. Lady has dealt with the newspapers and expunged from them everything that she finds objectionable, perhaps she and Mr. Livingstone will go round the parks of London doing away with all the statues that she thinks might deprave people. There are few pleasures left to us today. One that I enjoy is sitting in an underground train, watching the faces of the people who are pretending not to be looking at page three of the newspapers. If the hon. Lady has her way, we will be deprived of that pleasure.

Mr. Tony Marlow: I believe that my hon. Friend should treat this matter seriously, if only because I imagine that neither of us has ever seen the Press Gallery so full.

Mr. Speaker: Order. The hon. Member must not interrupt. He knows perfectly well that there can be no


interruptions of the debate on a ten-minute Bill, and that, in any case, he must not refer to those who are not in the Chamber.

Mr. Marlow: I apologise profusely, Mr. Speaker.

Mr. Adley: The trouble with the hon. Lady, and those who think like she does, is that she tends to mix only with those who share her views. To suggest seriously, as she does, that these pictures are offensive to the overwhelming majority of women is inaccurate. I suggest that they are offensive to the overwhelming majority of those with whom the hon. Lady is in touch, which is not the same thing at all.
This is a ridiculous proposal. I propose to divide the House so that every Opposition Member can stand up and be counted. I suggest that, of all the measures that have been proposed to the House during this Session, this Bill deserves the booby prize.

Question put, pursuant to Standing Order No. 15 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):

The House divided: Ayes 97, Noes 56.

Divison No. 98]
[3.43 pm


AYES


Alton, David
Harrison, Rt Hon Walter


Ashley, Rt Hon Jack
Haynes, Frank


Atkinson, N. (Tottenham)
Hogg, N. (C'nauld &amp; Kilsyth)


Barron, Kevin
Holland, Stuart (Vauxhall)


Beckett, Mrs Margaret
Home Robertson, John


Beith, A. J.
Howells, Geraint


Biggs-Davison, Sir John
Hoyle, Douglas


Blair, Anthony
Hughes, Robert (Aberdeen N)


Boyes, Roland
Hughes, Simon (Southwark)


Brown, R. (N'c'tle-u-Tyne N)
Kennedy, Charles


Bruce, Malcolm
Kirkwood, Archy


Caborn, Richard
Lamond, James


Campbell-Savours, Dale
Litherland, Robert


Canavan, Dennis
Lloyd, Tony (Stratford)


Clarke, Thomas
Lofthouse, Geoffrey


Clay, Robert
Loyden, Edward


Clelland, David Gordon
McCurley, Mrs Anna


Clwyd, Mrs Ann
McTaggart, Robert


Corbett, Robin
Madden, Max


Cox, Thomas (Tooting)
Marek, Dr John


Craigen, J. M.
Mason, Rt Hon Roy


Cunliffe, Lawrence
Maxton, John


Dalyell, Tam
Maynard, Miss Joan


Deakins, Eric
Meadowcroft, Michael


Dubs, Alfred
Michie, William


Duffy, A. E. P.
Mikardo, Ian


Dunwoody, Hon Mrs G.
Morris, Rt Hon A. (W'shawe)


Eastham, Ken
Nellist, David


Edwards, Bob (W'h'mpt'n SE)
O'Brien, William


Evans, John (St. Helens N)
O'Neill, Martin


Fisher, Mark
Park, George


Foster, Derek
Parry, Robert


Freud, Clement
Pavitt, Laurie


Godman, Dr Norman
Pike, Peter


Gould, Bryan
Porter, Barry


Hamilton, James (M'well N)
Powell, Raymond (Ogmore)





Rogers, Allan
Thorne, Stan (Preston)


Ross, Ernest (Dundee W)
Thornton, Malcolm


Sedgemore, Brian
Wallace, James


Short, Ms Clare (Ladywood)
Wareing, Robert


Short, Mrs R.(W'hampt'n NE)
Weetch, Ken


Skeet, Sir Trevor
Welsh, Michael


Skinner, Dennis
Wigley, Dafydd


Smith, Cyril (Rochdale)
Wilson, Gordon


Spearing, Nigel
Winnick, David


Squire, Robin
Young, David (Bolton SE)


Steel, Rt Hon David



Stott, Roger
Tellers for the Ayes:


Strang, Gavin
Miss Jo Richardson and


Tapsell, Sir Peter
Mr. Kevin McNamara.


Taylor, Teddy (S'end E)





NOES


Adley, Robert
Jones, Gwilym (Cardiff N)


Atkinson, David (B'm'th E)
Jones, Robert (Herts W)


Baker; Nicholas (Dorset N)
Kellett-Bowman, Mrs Elaine


Beaumont-Dark, Anthony
King, Roger (B'ham N'field)


Best, Keith
Latham, Michael


Bevan, David Gilroy
Lawrence, Ivan


Body, Sir Richard
Leigh, Edward (Gainsbor'gh)


Bowden, Gerald (Dulwich)
Lightbown, David


Brandon-Bravo, Martin
Lloyd, Ian (Havant)


Brown, M. (Brigg &amp; Cl'thpes)
McCrindle, Robert


Bruinvels, Peter
MacKay, Andrew (Berkshire)


Buck, Sir Antony
McQuarrie, Albert


Cocks, Rt Hon M. (Bristol S)
Miscampbell, Norman


Coombs, Simon
Mitchell, Austin (G't Grimsby)


Dicks, Terry
Nelson, Anthony


Dover, Den
Nicholls, Patrick


Dykes, Hugh
Norris, Steven


Emery, Sir Peter
Ottaway, Richard


Fairbairn, Nicholas
Peacock, Mrs Elizabeth


Faulds, Andrew
Shepherd, Colin (Hereford)


Fletcher, Alexander
Silvester, Fred


Forsyth, Michael (Stirling)
Smith, Tim (Beaconsfield)


Fox, Marcus
Stern, Michael


Fry, Peter
Stewart, Andrew (Sherwood)


Gardiner, George (Reigate)
Temple-Morris, Peter


Grylls, Michael
Wiggin, Jerry


Hamilton, Neil (Tatton)



Harris, David
Tellers for the Noes:


Hayward, Robert
Mrs. Edwina Currie and


Jessel, Toby
Mr. Greg Knight.

Question accordingly agreed to.

Bill ordered to be brought in by Ms. Clare Short, Ms. Jo Richardson, Miss Joan Maynard, Mrs. Ann Clwyd, Mrs. Anna McCurley, Mrs. Renée Short, Miss Betty Boothroyd, Dame Judith Hart, Mrs. Margaret Beckett and Mrs. Gwyneth Dunwoody.

INDECENT DISPLAYS (NEWSPAPERS)

Ms. Clare Short accordingly presented a Bill to make illegal the display of pictures of naked or partially naked women in sexually provocative poses in newspapers: And the same was read the First time; and ordered to be read a Second time upon Friday 18 April and to be printed. [Bill 104.]

Opposition Day

[10TH ALLOTTED DAY]

City of London

Mr. Speaker: I have selected the amendment in the name of the Prime Minister.
I draw the attention of the House to the fact that references to proceedings on a Bill in Standing Committee, particularly references attempting to deal with the content of the debate in the Committee are not in order. I draw hon. Members' attention to page 426 of "Erskine May".

Mr. D. N. Campbell-Savours: On a point of order, Mr. Speaker. Does that mean that references to the Securities and Investments Board will not be in order? If so, will not that substantially inhibit the nature of the debate?

Mr. Speaker: I specifically do not wish to inhibit the nature of the debate, but I have to draw the attention of the House to the rules on these matters.

Mr. Roy Hattersley: I beg to move,
That this House, deploring the increasing influence of the City over the Government and its policies, calls upon the Government to put aside considerations of political support and personal connection and to introduce a system of regulation of, and supervision for, the financial services which will provide an adequate response to the increase in City fraud, to introduce a stricter system of surveillance of monopolies and mergers, and to adopt economic policies which are to the benefit not of the City alone, but of the whole economy and which will therefore assist in the reduction of unemployment, the rehabilitation of manufacturing industry and the provision of an adequate alternative to diminishing oil revenues.
Today we debate the City against a background of continuing economic crisis. The fact that the existence of that crisis, the truth of the existence of that crisis, will be rejected by Conservative Members who speak underlines the gulf which divides the two sides of the House and the necessity for today's debate. Conservatives judge economic success by the Financial Times index. We judge it by different standards, not least the ability of our nation to provide jobs for all its people.
The facts of the economic crisis are that unemployment now stands at between 3·5 million and 4 million, manufacturing trade is in deficit and real interest rates are at record levels. Each of those individual catastrophes has been intensified by the Government's enthusiasm for economic policies which benefit the City but damage the rest of the economy. We have today a Government of the City for the City and, by far too large an extent, by the City.
The connection between the Government and the Tory Benches was on blatant display during the Second Reading of the Financial Services Bill when stockbrokers and underwriters from the Conservative Benches took it in turn to defend their vested interests and to argue against effective Government supervision. It is that close connection that makes a Tory Government certainly unwilling to tackle, and perhaps incapable of tackling, the City fraud crisis by instituting an effective system of regulation and supervision.
Yet rarely a week goes past without the discovery and exposure of some other malpractice and scandal. Indeed,

only this morning our newest daily paper, Today, had on its front page an exclusive story about what is rightly described as the latest series of dirty tricks.
The normal defence for the City's behaviour and the Government's refusal to act appropriately is the assertion that a majority of City firms is honest. Of course, I accept that, but the honest and honourable majority is not sufficiently determined to expose and act against the criminal minority. I give a current example. Ten days ago, I wrote an article in The Observer which spoke of stock exchange fraud. Early this week, I received a letter from Sir Nicholas Goodison, the chairman of the stock exchange, who asked me—I think it was intended to be a challenge—what I meant by stock exchange fraud and what examples I could give him.
I cannot believe that Sir Nicholas does not know the facts of insider dealing, as confirmed on 11 December by the Parliamentary Under-Secretary of State for Trade and Industry in an answer given in another place. He confirmed that there were 25 prima facie cases of insider dealing and that 80 cases were referred to the Department of Trade and Industry under section 2 of the Companies Act, and he expressed anxiety about the difficulty of securing convictions in such cases. Yet Sir Nicholas challenges me to explain what I am talking about. I can only assume that Sir Nicholas's definition of fraud is different from mine and different from that of most people outside the City.
Some people in the stock exchange take a stronger and clearer view on these matters than does the chairman. Michael Feltham of the stock exchange finance department wrote in the Financial Times earlier this week:
We can track down the small insider deals … but the big fish go offshore.
They go offshore because of inadequate supervision and because too many people in the City who may be honest are not prepared to expose the dishonesty among them. Indeed, the City remains a charmed and closed circle wedded to the misplaced loyalty of a gentleman's club, although the City is clearly no longer the exclusive preserve of gentleman.
The City is incapable of regulating its affairs. Let us consider the alternatives to that, in each area, which are offered by the Government. The Government's remedy for bank fraud is a board of supervision which is almost a subcommittee of the Bank of England. But the Bank of England, especially under its present Governor, is wholly incapable of performing that task, because the Bank of England is not the agent of Government in the City, but the voice of the City in Government. What is more, the new supervisory agency—the Bank of England—was blamed by the Chancellor of the Exchequer when the going was rough and he needed something to hide behind. It was made a scapegoat for compounding the Johnson Matthey affair, yet now the bank must make sure that errors for which it was partly responsible do not happen again.
As a remedy for the City's general malpractices, we are offered the prospect of legislation based on the Gower commission's recommendations. Yet the Government know that those recommendations were made before deregulation increased potential rewards, potential risks and, therefore, the temptation to defraud. As a remedy for Lloyd's fraud, we were offered two conflicting


assurances. The first was that the Lloyd's Act 1982 is sufficient; the second is that a new inquiry will examine whether the Lloyd's Act 1982 is sufficient.
I ask the Chief Secretary two specific questions, although in the light of previous behaviour whether anyone will believe his answer is open to question. What does he think about, in many cases, the absence and, in all cases, the delay and reluctance to mount prosecutions against City frauds? Secondly, how would he react if I were to suggest that we abandoned any hope of pursuing social security frauds, most of which are minute compared with the rewards obtained from City malpractices?
All that being said, and my hopes of an honest answer being optimistically renewed, I must tell the Chief Secretary that the City crime wave is not the most important or most urgent issue that we should debate. The crime wave is only one aspect of a larger problem: the City's view of itself as an independent power that is too big, too powerful, too rich and too international to be supervised by the Government, the Government's craven acceptance of the view that the City can act independently and the Government's agreement that the City can develop a life of its own detached from the rest of the economy.
The United Kingdom is the only country that talks about a separate institution— the City — as though it were not part of the rest of the world, the rest of the economy and the other prospects and hopes for the country. With the City's international connections, only in Great Britain is its interests not so much different from the interests of manufacturing economy, but often diametrically opposed to them. Indeed, as the circumstances and facts of the past seven years prove, as the real economy of investment, output, manufacturing, exports and jobs declines, the City can benefit from that, improve its position, increase its rewards and extend its influence.
The Government's pandering to the City's wishes has meant that, for the past six years, our economic policy has benefited financial services but worked directly against the interest of manufacture, employment and visible trade. The City has benefited from high interest rates, uncompetitive exchange rate and the abolition of exchange control; it has benefited, in part scandalously, from the sale of national assets.
The City has made vast sums from the privatisation programme, and again I ask the Chief Secretary some specific questions. Much of the money—certainly some of it—was made improperly. First, the City prices the assets, or, to be more specific, it underprices the assets. It is estimated that the City underpriced the assets sold by the Government by about £3 billion. Had the Government obtained the proper price, it would have been enough to fund the entire programme of jobs for the long-term unemployed that was recommended to the House by the Select Committee on Employment.
It is worth noting that the Government, composed of City experts—or at least financial journalists—let the City get away with it. I hope that the Chief Secretary will tell us whether incompetence or malice allowed the Government to sacrifice £3 billion to City corruption. It was one or the other. One way or another, the Government lost £3 billion of taxpayers' money and, as the afternoon goes on, the Chief Secretary must choose which it was.
Having underpriced the assets, the City then bought many of them at the artificially low price. Indeed, I understand — I trust that the Chief Secretary will comment on it — that some City institutions bought

assets in excess of the amount which they were officially allocated. As well as making that killing on the underpriced assets, the City also charged the Government an unwarranted underwriters' risk premium, when it knew that there was no risk. The City knew that the stock would be sold and that the price was too low, yet it chose to charge the Government a commission which it knew was unjustifiable. Some of the questions that I would have wished to ask this afternoon have, as a result of recent prosecutions mounted and continued this week, become subject to the sub judice rule, but I can at least ask the Chief Secretary this. As it is beyond dispute that many of the assets sold by the Government have been scandalously undervalued—

Mr. Tim Smith: Rubbish.

Mr. Hattersley: Rubbish? We shall hear the Chief Secretary defend that in a minute. Many of the assets sold by this Government have been scandalously undervalued—

Mr. Smith: What about the last issue of Cable and Wireless shares, which was exactly right?

Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. If the hon. Gentleman wishes to intervene, he knows that there is a proper way to do so.

Mr. Hattersley: As it is generally accepted by all those without bias or a vested interest in financial concerns—those who have are showing their spots and colours vividly and dramatically this afternoon—that what I have said is true, I ask the Chief Secretary how he proposes to avoid that scandal in the future, or is he so anxious for a quick sale of public assets to pad the Budget and make future tax cuts possible that he is prepared to sell off national assets knowing that the city is improperly and unscrupulously lining its pockets?

Mr. Allan Rogers: My right hon. Friend was challenged from a sedentary position by the hon. Member for Beaconsfield (Mr. Smith). I hope that my right hon. Friend will listen to what the hon. Gentleman is saying. Does my right hon. Friend realise that the hon. Gentleman is parliamentary consultant to the National Association of Security Dealers and Investment Managers, and to the County bank, and obviously has a strong interest in this debate and knows what he is talking about?

Mr. Hattersley: I think that the interesting nature of the hon. Gentleman's remarks was not so much his authority, which I do not doubt, but the passion with which he defended the vested interest with which he is concerned.
I concede that, not surprisingly during the past seven years, the City has done very well by its own standards. City salaries have risen astronomically. I know that the Chief Secretary is an expert in these matters. Will he give us his judgment about City salaries and about the society in which we remove the wages council protection from the young but allow City institutions to pay men of 30, 35 or 40 not only £50,000 or £60,000 a year, but a £250,000 signing-on fee—a new phrase in the English language that goes with hello, and which the Chief Secretary knows perfectly well is common in the City? Will he comment not only on the morality and propriety of that, but on how he thinks that it affects the Government's drive for lower wages for those at the lower end of the income scale?
The City has done well, its salaries have risen vastly and City employment has risen while employment in the rest of the economy has slumped. We have to understand — and hon. Members who defend the City have to accept—that the City has not and cannot make up for the matching and related collapse in manufacturing industry. The City cannot fill the gap that will be left in our balance of payments when the oil begins to run out. The British Invisible Exports Council was explicit on this point. It says that it does not see the growth of services
as being to a major extent a substitute for decline in general industrial activity.
In the words of the right hon. Member for Old Bexley and Sidcup (Mr. Heath),
the service industries have to have something to service.
In the economy in general under this City-oriented Government, it has been seven years of decline, in part because the City has hopelessly failed to provide investment in export promotions, in job creation and in the areas where manufacturing industry might grow and where new jobs might be found.
There are three sectors of particular concern. One is small firms, particularly those that need, and should be provided with, loans and investment at the soft rates common among our more successful creditors. Secondly, there is an important need for but failure in long-term investment—the failure of the City to take a long-term view of these things. Thirdly, there is a desperate need for the City, when it is examining industry, to make a more sensible evaluation of the long-term risks.
One of the reasons why long-term risk evaluation is so often inadequate is that the City does not know about manufacturing industries, is not interested in them and is not concerned in them. In our more successful competitors in the OECD and EEC there are banks that choose to work as part of industry alongside industry and understanding its problems. Here in Britain, the City is different, superior, exclusive and industrially ignorant. However, when charged with failure to provide an adequate investment, the City always gives the same circular, self-righteous, self-serving defence. It is that there is plenty available for suitable investment. I see the hon. Member for Beaconsfield (Mr. Smith) utter the words as I say them. That is his view, but not that of British industry.
I quote from Sir Terence Beckett, not usually on the side of Labour party economic policy, who spoke to the House of Lords Select Committee about:
the widespread comments I get from industry, particularly small and medium sized companies who have difficulty in getting finance from banks".
The British Chamber of Commerce was equally conclusive. It said:
Every bank will tell you that there is money available in all directions—but they have to or feel obliged to put certain criteria on the lending which are somewhat different from our overseas competitors".
The hon. Member for Beaconsfield may laugh at the idea of the British Chamber of Commerce complaining about the absence of investment, but he is laughing about the failure of the Government and the institutions that they support to help small firms to develop and grow.
In any case, what does money available for suitable projects mean in practice? I give the House a definition offered to me by a west midlands clothing company whose highly successful expansion, principally into the export

market, was made possible only because of the help that it received from the West Midlands enterprise board. The chairman of that company, who had touted about the City looking for new investment, said;
If I had wanted to build a casino in Mayfair they would have pressed £5 notes into my hand. But because I wanted to make things and export things, they did not want to know.
They want to know about some things—the merger boom, for example, which occurs under our wholly inadequate competition policy. The City wants to finance takeovers, which have nothing to do with efficiency, output or employment, because this is a sector of easy pickings. It is work with which the real economy has no connection, work that is unproductive in terms of investment, output and jobs.
What is more — and the tragedy and mistake is accentuated by the takeover boom—the stock exchange system as a whole concentrates far too much of its financial attention on short-term profits. Prices are determined by the most recent returns, and so are takeover profits. Now, with more and more successful predators stalking the market, company after company increasingly occupies its time in erecting protection from suddenly being swallowed up. I offer in evidence the comments made in an article in the Bank of England Quarterly by David Walker, the bank's executive director. He talked about takeover mania
re-inforcing in many boards the disposition to be cautious about innovation expenditure which reduces profit in the short term.
The country needs the will to innovate and a willingness to make judgments on the long-term not the short-term profits. Yet the takeover mania, the inadequacies of present competition policy, buttressed by the behaviour of the City, has concentrated industry's mind more and more on the next share price, on the next quarterly profit and on the prospects of being swallowed up while the needs of the real economy are investment growth and jobs. Those needs are forgotten.
Perhaps most important of all, for the City to say that its investment programmes, investment potential and the investment it makes available to manufacturing industry are meeting the economy's needs is for the City complacently to accept an economy in which manufacture collapses, in which there is an incipient balance of payments crisis which will break over us when the oil runs out and in which there are permanently 3 million or 4 million men and women unemployed. That may be good enough for the City, with its vast salaries, its great power and its special relationship with the Government. It is not good enough for the Opposition, and I do not believe that it is good enough for the people of this country.

The Chief Secretary to the Treasury (Mr. John MacGregor): I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
recognises the continuing and increasing contribution being made by the financial services industry in the United Kingdom to wealth creation and employment; and welcomes the Government's measures to remove obstacles to the efficient operation of the market in financial services, to improve the regulatory framework in the whole financial services sector and to deter and punish fraud.".
The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) began by speaking about the damage caused by fraud and other dishonest practices in the City. I agree completely with him. Fraud is morally wrong and wholly unjustifiable. It besmirches the good reputation of


the City, inflicts serious damage on honest practitioners and frightens investors. It is quite unacceptable that fraudsters can—as it sometimes seems—escape justice with the proceeds of their crimes. The Government have been and are determined to ensure that the sternest action possible is taken against fraudsters wherever their guilt can be proved.
However, I part company from the right hon. Member for Sparkbrook on this point. He waxed indignant about fraud, and the Government share that indignation. However, we have matched our indignation with action over a number of years, long before Opposition Members chose to make this a headline-hunting issue. Let me first remind the House of the Government's programme for dealing with cases of serious financial fraud.
On 8 November 1983—long before the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) started to take such a close interest in this subject—the Lord Chancellor and the then Home Secretary announced the establishment of the Roskill committee to investigate a range of problems associated with the detection, investigation and prosecution of serious financial fraud. That was a fundamental inquiry, basic to this vital issue of financial fraud, and it has led to wide-ranging and radical recommendations which are likely to have much greater long-term effects than anything else I have seen canvassed.
On 14 January this year, my right hon. Friend the Home Secretary welcomed that report. The committee made 112 recommendations designed to make the investigation of fraud more effective, and to remove some of the present obstacles to bringing complex financial fraud cases to court and to a successful conclusion. The debate on the report on 13 February in the House brought some flavour of this complexity which makes big financial fraud so much harder to tackle than the Opposition sometimes pretend. I make no secret of my own leaning towards agreement with Lord Roskill's main recommendations, although I note that my right hon. Friend the Home Secretary has said that he is consulting on the matter.
I noted that the right hon. Member for Manchester, Gorton (Mr. Kaufman) was ready to reject one of Roskill's major proposals — trial by assessors — without a moment's thought. It is of course important to bear constantly in mind that, although it is Lord Roskill's recommendation about trial by jury that has attracted most attention, his committee's report contains a mass of detailed proposals which would dramatically improve the chances of bringing fraudsters to book. My right hon. Friend the Home Secretary is now urgently considering with colleagues the Roskill recommendations on the preparation and conduct of fraud trials. The Government will return to the House soon with firm legislative proposals.
In July 1984, again well before the Opposition were prompted by the hon. Member for Hackney, South and Shoreditch to take an interest in fraud, my right hon. Friend the Chancellor of the Exchequer announced the establishment from 1 January 1985 of the fraud investigation group. That followed months of planning. As my right hon. Friend said at that time in a speech to the Bow group:
The investing public needs to be assured that wrongdoers and fraudsters will be speedily and effectively brought to book under the law".

Again, that is an example of the Government taking a prompt initiative.

Mr. Dennis Skinner: The Minister has said, over and over again, that the Government are doing something about fraud. Why is it, then, that Peter Cameron-Webb and Peter Dixon are in the United States? Peter Dixon has been served with a writ in connection with a civil action regarding Lloyd's and Lloyd's says that these two people have got away with £39 million. If a civil action writ can be served, why has the fraud squad, which the Government controlled so effectively during the miners' strike and at other times, not been able to put its hands on these people? We have extradition agreements with the United States, so why have not the Government done anything about that?

Mr. MacGregor: As the hon. Gentleman knows, prosecution decisions rest with the Director of Public Prosecutions and with the Attorney-General. They do not rest with the Government. My right hon. and learned Friend the Attorney-General and my hon. and learned Friend the Solicitor-General have explained the difficulties on a number of occasions. I share the hon. Gentleman's frustration at the difficulties which have been encountered. The various initiatives, including the follow-up of the Roskill report, will make a major advance in enabling us to deal with such problems.
The fraud investigation group is a specialist group supplementing extensive fraud investigation work in police forces all over the country. Its resouces have already been increased during its first year of operation. On 19 December last year my hon. and learned Friend the Solicitor-General told the House that nine professional officers were to be added to the 15 now employed by the Director of Public Prosecutions — a 60 per cent. increase.

Mr. Hattersley: I think that the figure is greater than that, as there were 21 officers before. Will the right hon. Gentleman confirm that, while there are 50 officers in the fraud group and while there has been a 60 per cent. increase, there are in the Department of Health and Social Security 176 senior officers pursuing 30 frauds in that Department?

Mr. MacGregor: I said that there had been a 60 per cent. increase, and that is a substantial figure. There was a similar number of officers under the Labour Government. The point is that we are dealing with serious financial fraud cases and there are fewer of these than of any other offences. It is important that we should ensure that there is no shortage of resources to follow up that kind of fraud work. That is why there has been a corresponding increase in support staff.
Nor is fraud solely tackled by the police and the DPP. I shall here discuss the question about relevant numbers of resources raised by the right hon. Member for Sparkbrook. Earlier this year, my right hon. Friend the Secretary of State for Trade and Industry announced an increase of nearly 200 in the investigative staff of his Department. We are not only considering how the law and investigative and enforcement processes can be strengthened; we are ensuring that the extra resources necessary are provided.
One of Lord Roskill's more far-reaching recommendations was that exceptional cases of serious financial fraud —which is what the right hon. Member for Sparkbrook was focusing on this afternoon—

Mr. John Smith: My right hon. Friend spoke about all frauds.

Mr. MacGregor: But he concentrated on serious financial fraud. Lord Roskill said that these could be handled far more effectively if the resources of the various agencies concerned — the police, the DPP, the companies inspectorate of the Department of Trade and Industry and the revenue departments—were to combine to form one unit, and he suggested that the Government should examine that possibility. I was immediately charged with that task, and I am now urgently undertaking a study in depth with a view to making firm recommendations as soon as possible.
Dealing effectively with fraud is, of course, of crucial importance. That is why I put it first. But we must keep it in context. We are dealing with only a tiny minority of City practitioners. It is, of course, the disproportionate publicity they get and the damage they do that make it so vital to deal with fraud. I want to turn now, therefore, to the more general and regulatory City matters to which the motion refers.
Great changes are taking place in the financial markets. Technological changes are changing businesses beyond recognition. They have made long-established practices, and the institutional machinery to control them, rapidly outdated. They have greatly affected the speed and manner of transactions. They have internationalised the markets even more than hitherto. Of course, they bring the risk of computer and telecommunications fraud, a subject on which the Bank of England issued guidance last year to the managers of financial institutions.
Changes are taking place in the institutions. The new financial conglomerates are establishing themselves in all the major financial centres of the world, not just this one. Changes are taking place in the markets themselves, the instruments that are traded and the ways in which they are bought and sold.
The Government are responding to these changes with a three-pronged strategy.

Mr. Hattersley: How many prongs?

Mr. MacGregor: Three, and they are all vital. First, they have removed a raft of distortions from the markets to enable London to attract a major share of the increasing world trade in financial services.

Mrs. Elaine Kellett-Bowman: Are not the actions of the Opposition astonishing? If they are laughing so much, clearly they are not taking their motion seriously.

Mr. MacGregor: I have been rather surprised at some of the Opposition's points. I agree with my hon. Friend.
We have swept away controls and restrictions through tax changes, through medium-term monetary policies and by opening the door to the stock exchange's own reforms. Perhaps most important of all, we have swept away exchange controls. This has attracted business back to London, and brought new life to Britain's financial markets.

Mr. Jack Straw: Will the right hon. Gentleman give way?

Mr. MacGregor: I apologise to the hon. Gentleman for not giving way, but this is a short debate.
Let there be no doubt that in these important, swiftly moving, competitive international markets the alternative for the City would not have been an imperceptible lapse

into shabby gentility. This is the important point of the first set of changes. There are no comfortable halfway houses. The penalty for failing to compete, with all these changes around the world, would have been swift and sure, and the consequences would have been loss of national income, loss of substantial invisible earnings and loss of international status.
Secondly, the Government are setting in place an effective and comprehensive regulatory system. The Financial Services Bill—I shall skate quickly over this matter—which is the most comprehensive overhaul of investor protection for 40 years, and the Building Societies Bill are before the House. As I have already mentioned, we published a White Paper on banking supervision in December and intend to introduce banking supervision legislation at the earliest opportunity.
In so acting we have drawn lessons from the Johnson Matthey affair and are taking the action needed to strengthen banking supervision promptly. In this the Government have acted quickly and effectively to deal with the lessons for those aspects of banking supervision which are the Government's responsibility. Between December 1984 and June 1985 a full review was carried out of the procedures of banking supervision and the legislative framework in which it was conducted. The review committee's report was published in June as a basis for consultation, and a White Paper on banking supervision was published last December outlining our plans for early legislation.
It is clear from the work of the review committee, and from the JMB case, that there are fundamental shortcomings in the Banking Act which the Labour Government introducted in 1979. That Act created a two-tier system of recognised banks and licensed deposit takers which, as my hon. Friend the present Economic Secretary to the Treasury warned at the time, was bound to lead to problems. One of the consequences was that different standards of supervision were applied to the two categories.
It is not an offence under the 1979 Act for the management of a bank like JMB to have provided incorrect and misleading information to the supervisor. These are among the matters which we propose to remedy in the new legislation. I have no doubt that the new and more comprehensive system of supervision which this will establish will make an important contribution to maintaining the reputation of our banking system and will enable the supervisor to deal with problem cases more readily.
It is not the prime objective of this comprehensive regulatory framework to tackle fraud. But a number of provisions, common to all three pieces of legislation, will make the City a tough environment for fraudsters: businesses will have to be more open with their investors; auditors will be given new powers and responsibilities; and supervisors will work closely together, and co-operate more with their overseas equivalents.
The new legislative framework will be flexible enough to deal with innovation, to avoid overlapping and to close loopholes. It will be backed up by the new supervisory arrangements for financial conglomerates, announced on 21 January by the Under-Secretary of State with responsibility for corporate and consumer affairs—my hon. and learned Friend the Member for Folkstone and Hythe (Mr. Howard).
This brings me to the third prong of the Government's strategy for financial services. I shall refer to it briefly as I have touched on it already. I refer, of course, to an effective system for the detection, investigation and prosecution of fraud. I have already mentioned much of what the Government are doing in this area. For good measure the forthcoming criminal justice Bill will make it far harder for fraudsters to enjoy the proceeds of their crimes. Not only will proposed changes to the rules about admissible evidence and criminal procedures help to bring criminals to book, but maximum sentences for corruption offences, such as bribery. will be extended to seven years from two at present and we are considering whether to take powers to seize assets derived from very serious fraud.
It took a Labour Government five years from the onset of the secondary banking crisis and under pressure from the European Community to produce the Banking Act in 1979, which is now recognised to be "totally inadequate", in the words of the hon. Member for Thurrock (Dr. McDonald). It is directly contrary to the facts and to the Government's record that the Opposition should criticise the Government on grounds of inaction, tardiness or concealment. That is why I totally reject the allegation by the right hon. Member for Sparkbrook that the Government have not been acting vigorously to deal with all the aspects of fraud that he raised.
The right hon. Member for Sparkbrook has made much of the charge that the City has been failing the nation, particularly in the context of starving industry of funds to expand and invest. He has failed to make his charge stick, and the recent record and present facts belie it. I do not see anything in current Labour party proposals which would improve the range of instruments available to the borrower or help the investor — indeed, quite the reverse.
This constant accusation of the City's failure to provide funds for investment led the last Labour Government to set up a wide-ranging inquiry under the noble Lord, Lord Wilson. They hoped that it would identify this famous financing gap, and they failed to find it. True, they argued that there was a lack of provision of outside equity for the small company. At the time the committee was sitting, I happened to agree with its finding, but it was because of the lack of fiscal and other frameworks to encourage investors to provide it, whether institutional or individual.

Mr. Tam Dalyell: Will the right hon. Gentleman give way?

Mr. MacGregor: I am sorry; I shall not give way, as this is a short debate.
We have now provided that framework—with great success, as I shall show. True, Lord Wilson's committee queried whether very small businesses, especially those starting up, were held back through lack of bank finance because they did not have a track record. We provided —indeed, I introduced to the House—the loan guarantee scheme to establish the extent to which there was a problem, to provide a new mechanism to help to overcome it and, through it, to encourage the banks to do more.

Mr. Bryan Gould: What is the failure rate?

Mr. MacGregor: That is an interesting question. If the hon. Gentleman thinks that the failure rate is too high, it suggests that in many cases the banks were probably right

not to lend. [Interruption.] That has not been the case. I believe that the loan guarantee scheme has helped many small businesses and people starting up to get going.

Mr. Dalyell: Will the right hon. Gentleman give way?

Mr. MacGregor: I am sorry; I shall not give way.
But beyond these small and particular areas, the Wilson committee failed to substantiate the charge of a great financial gap which required massive new state mechanisms. It is worth noting in passing that the committee did substantiate— I quote from the Wilson report—
the pervasive effects"—
I hope that the right hon. Member for Sparkbrook will listen to this—

Mr. Hattersley: Will the right hon. Gentleman tell us what the real interest rate was when the Wilson committee announced that there were no problems and what the real interest rate is now?

Mr. MacGregor: The right hon. Gentleman is drawing attention to the Government's tremendous success in getting inflation down. That was precisely the point I was making when I was interrupted.

Mr. Hattersley: Can the right hon. Gentleman tell us what the real interest rate was when the Wilson committee said that there was no problem and what the real interest rate is now?

Mr. MacGregor: I cannot remember offhand—I am always honest in answering questions — but the real interest rate would have been lower at that time. That is not the point. The Wilson committee drew particular attention to
the pervasive effects on the financial system and on real investment of high and fluctuating rates of inflation.
It is worth noting the reference to the pervasive effects of high inflation on real investment.
We have, of course, tackled that problem too. The fact is that our highly sophisticated and comprehensive network of financial institutions offers a broad, flexible, innovative and imaginative range of financing opportunities to British business.
Under this Government we have been rebuilding our overseas assets—even, to use the hackneyed phrase, for the time that North sea oil runs out. But it has not been at the expense of home-based British business and commerce. There has been no lack of supply of funds, whether equity or venture capital or bank lending, for any viable industrial proposal. The figures prove it. British industry has been investing as never before. Business investment in 1984—the last full year available—was up 15 per cent. to an all-time high. Manufacturing investment was up 14·5 per cent.—an all-time high. If we look at the sources of finance — these are the answers to the right hon. Gentleman's charges—we see that last year over £5 billion of new capital—more than ever before and certainly much more than in any year of Labour government — was raised through the stock exchange for British companies. That excludes the privatisation issues. That is the long-term investment of which the right hon. Gentleman has spoken. Another £157 million was raised through the unlisted securities market. Six years ago that market did not exist. Now some 300 companies are quoted, with a total market capitalisation of more than £3 billion.


The right hon. Gentleman referred to small firms. There has been a dramatic growth, too, in the venture capital market. In 1979, venture capital crucial to the small and dynamic entrepreneur, especially in the expansion phase, was in the doldrums. There were only 20 venture capital funds, which invested less than £10 million between them. Encouraged by the climate set by the Government, including fiscal reliefs, the gap has now been filled in entirely the right and appropriate way for the expanding business. Five years on from 1979, investment during 1984 totalled over £280 million, supporting almost 600 United Kingdom companies. Venture capital activity in the United Kingdom was two thirds of the total in the whole of the European Community. Indeed, as a proportion of GDP our venture capital industry last year was larger than that of the Americans.
I notice that the Liberal party's amendment refers to
small businesses and local enterprise.
These figures prove that the changes we have introduced have produced the flow of funds precisely to help those types of business. It is a remarkable transformation and is a far better way of encouraging the growth of new and developing companies, hungry for capital funds, and of seeking out the winners than anything the right hon. Gentleman has sought to devise.
The right hon. Gentleman's sole proposal for a national investment bank reveals the Opposition's failure to comprehend that a national investment bank is precisely the wrong way to assist the financing of British industry. Their indifference and often outright opposition to the Government's programme of privatisation—which we saw displayed again this afternoon — the greatly increased range and take-up of direct share-ownership schemes, personal pension plans and so on show their immense underlying hostility to wider share ownership and financial independence for individuals. Similarly, they were at first opposed to the sale of council houses. Their constant emphasis on certain minority aspects of City operations reveals a neurosis about this very successful part of the British economy, and an anxiety always to diminish and denigrate the good, and exaggerate out of all proportion the blemishes.
It would have been much better if the right hon. Gentleman had today also emphasised the very substantial positive contribution which our financial sector, including the City, makes to our national life. The share of financial and business services in output was 13·2 per cent. in 1984 compared with 11·1 per cent. in 1974, representing real volume growth of 73 per cent. Employment in the industry increased by 400,000 to a total of 1·9 million over that period, spread throughout the country. The right hon. Gentleman neglects that important point. Indeed, there was a fall in employment in the City of London during that time.
London is easily the largest international foreign exchange market. According to a recent study by the Group of Thirty, some $50 billion a day is traded in London—a third of the world total. Of $150 billion of new issues of Eurobonds in 1985, some two thirds are estimated to have been done in London. Of new issues of foreign bonds—totalling $9·5 billion—between a third and a half of the business was done in London. Small wonder, then, that the City's earnings from abroad have grown from around £400 million in 1968 to £6 billion in

1984. This has been achieved only by being thoroughly competitive, aggressive, innovative, internationally minded, marketing oriented and determined to provide service and quality. As it approaches the big bang, the City is demonstrating its determination to keep up to date and to maintain London as a leading world financial centre.
These are the qualities denigrated today by the right hon. Gentleman which we all wish to see spread throughout British industry and commerce.
The Opposition motion calls for
an adequate response to the increase in City fraud".
Long before they took an interest, the Government had recognised the inadequacies of the legislation and the machinery bequeathed to us by the last Labour Government. The roll call of actions is clear. The setting up of the Roskill committee shortly after the last election, the Insolvency Act 1985, the setting up of the fraud investigation group, the Financial Services Bill, and now the proposals to tighten up banking supervision—all of these, plus the increased resources we are putting into the machinery to deal with fraud, demonstrate our commitment.
The entire tone of the motion is an attack on the City. It is shameful that neither in the motion nor in the right hon. Gentleman's speech did he even begin to recognise the achievements of the City, its contribution to our economy and its standing in the world. He ought to have pride in this national asset, not to denigrate it. On both counts, the Opposition's motion falls.

Mr. Paddy Ashdown: I listened with care to the speech of the Chief Secretary to the Treasury and, while I do not want to associate myself with all the hyperbole used by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), I nevertheless recognise that in the Chief Secretary's speech there was a degree of complacency that was regrettable. I had hoped we would not find such complacency because the problems are much larger—as I hope to show—than he was prepared to admit.
It has been said that the City performs three functions for Britain—two of which are readily recognised but perhaps the other is often overlooked. First, it provides a market for the investor, large or small, which is a valuable function for Britain and the City. Secondly, it provides a useful earner of foreign currency — the money that Britain needs to survive. However, I suspect that its largest function, in respect of the structure of our nation, is to provide the mechanism to raise funds for British industry. We cannot do without that facility.
I have no doubt that the topics of corruption and fraud will feature largely in this debate as it has in previous debates. That is not wrong because they are matters which have recently hit the headlines, rightly so. Such practices have diminished the standing of the City. They have damaged the City and, after the big bang, may well cause it to be unable to earn the foreign currency it has earned in the past.
However, there is a larger scandal which lies beneath the more public scandal on the face of the City. It is a scandal of deficiency on the part of the City, which will have great significance to Britain. Is the City doing its job by Britain? Is it providing the funds that are needed by British industry? Is the City using the nation's money to generate some huge money-go-round primarily for its own


advantage? The City makes money by handling money, and the faster it goes round the bigger the profits are. The signs are not good.
I should like to take up what the Chief Secretary said about small businesses and regional development. A prime pillar of the Government's industrial policy is the encouragement of the small entrepreuneur and small businesses. The Chief Secretary said that there was no problem providing funds in that sector, but that has not been proved. I commend much of what the Government have done to encourage small firms and to establish new institutions for small firm financing. It would be churlish not to recognise that, but it would be inaccurate and, to some extent, complacent of the Minister to continue to believe, as he would have us believe, that matters are perfect. They are far from perfect. There is a large equity gap which he tried to deny, and many businesses are suffering as a result. There is increased centralisation of financial resources to the City, just as there has been centralisation of government.
We should imagine that we are a small firm in the midlands seeking £50,000. The Chief Secretary suggested that such a firm could go to venture capitalists, but their average lending is not £50,000, but £401,000. Very few venture capitalists will now lend less that £200,000. Sums below £100,000 are practically unheard of. So where does our small firm go? To the business expansion scheme perhaps? However, 53 per cent. of the scheme's funds last year were lent into or around the south-east of England. The midlands, one of the areas most devastated by the Government's industrial policies, has taken only 13 per cent. of business expansion scheme financing.
In the end, it is often easiest to go to the clearing banks. Britain has only four, which also are hopelessly centralised. There are about 20,000 clearing banks in the United States. Indeed, a national bank is forbidden by law there, but they have regional institutional banks. Many of the clearing banks have done a great deal to assist small industries. If our small business went to a large bank, however, we would still be asked to put down our house or car as collateral. It is small surprise, therefore, that many small business men seeking relatively small sums of finance now regard the relationship with the bank manager as forming the new eternal triangle—the bank manager, the spouse and him.
The Chief Secretary said that there was a good record on investment. He and the Government carefully omit to mention that that record is measured from last year, the year before or maybe 1983, but never from 1979, as investment in Britain has fallen to about 20 per cent. below what it was when the Government came to power. The Government's offer of assistance to small businesses falls seriously short of what is required at the lower end of the spectrum.
Even at the macro-business level, the signs are disturbing. The right hon. Member for Sparkbrook mentioned mergers. Britain is in the grip of merger mania. There was a day when, if somebody telephoned a City boss or captain of industry who did not want to be disturbed, he would find that a message had been left with the secretary to the effect that he was out getting orders. That used to be the most prestigious thing to say, but now the most prestigious thing to say is that the boss is out fixing up some sort of merger.
What property scandals were to the Heath Government in 1974, merger mania is fast becoming today. All the

ingredients are there—the high public profile of the mergers and the people involved in them, big killings, doubtful morality and bizarre behaviour by some who are partaking of the action.
The figures are revealing. There were £1·1 billion worth of mergers in 1981, £2·3 billion worth in 1982, £5·3 billion worth in 1984 and a full £7 billion worth last year—an increase of seven times over 1981. Nearly half the money that was invested in new plant and machinery for British industry last year was diverted into mergers. In the first four months of this year, the value of mergers on the cards and under negotiation exceeds the total spent last year. We have all the unsavoury practices that characterised the property boom of 1974. We have things called poison pills. Distillers has quietly agreed to pay £20 million of Guinness's takeover costs without a word to the shareholders or the workers.
The stock exchange has now addressed the matter and produced a new code of practice which provides that a company cannot devote more than one quarter of its annual profits to so-called poison pill operations. We have the character assassinations. Mr. Jimmy Gulliver of Argyll has found himself the victim of a rather unsavoury and tawdry character assassination by Binns Cornwall and Partners Ltd. in the City. Is that what we expect from an organisation whose success rests on its reputation for probity? I suspect not.
Great and important companies have been unbalanced to meet merger requirements. Financial Weekly put it succinctly recently when it said:
The willingness to divest which, at the best of times, is a sign of flexible and enlightened management becomes worrying for shareholders when clearly inspired by tactical considerations to do with bids. It becomes difficult to assess what the companies are up to.
If every arm and leg of the existing business must be regarded as available for sacrifice on the altar of the big merger, then what is the existing business? What is the strategy? Where is it going? How confident can shareholders be that it will bear more than a passing resemblance to its existing shape a year hence?
The enthusiasm for making a fast buck through mergers is now dominating sensible planning of future business.

Mr. William Cash: Will the hon. Gentleman give way?

Mr. Ashdown: I am trying to be brief. If I do not give way the hon. Gentleman might be able to speak.
Shareholders are not consulted and work forces are merely bundled up and consigned to a new owner without so much as a word. Unhappily, the City is far too dominated—not exclusively so—by the short term, the turn of a quick buck by tomorrow. Far too often, it is not interested in so-called patient money—investing in the future — which characterises investment in our competitor nations.
Young men, not yet 30, in the City are earning £60,000 or £80,000 a year. I see that the chief executive of Guinness has had his salary raised to £195,000 a year and has received shares worth more than £1 million. As the big bang approaches, such frenetic activity to buy people will get even more frenetic.

Mr. Richard Ottaway: Is the hon. Gentleman saying that, if the remote possibility of the Liberals forming a Government was realised, his party would restrict salaries in the City?

Mr. Ashdown: I am not saying anything of the sort. I am merely saying that these are the facts of life in the


City. If the hon. Gentleman is patient enough, he will hear how I believe that the Government have contributed to that. We must encourage an attitudinal change in the City.
I understand that there are young men not yet 30 earning vast sums of money. Some of them—and this will perhaps illustrate the problem of looking at things purely in the short term—are being assessed for bonus calculated over only three days. If they make a profit over three days they get a bonus to increase their salary. That is not the kind of attitude which the City has taken in the past, but it is an attitude that is growing today and of which we need to be aware. The City is a partner in creating what the right hon. Member the Leader of the Liberal party (Mr. Steel) has referred to as the "hamburger-stall economy". It seems to me that there are far too many, in the City and outside it, who do not believe in the long-term future. The prevailing mood, therefore, is fast becoming that of the Roman orgy — eat, drink and be merry and make whatever money we can, because tomorrow things will be different.
This is not surprising, because the City is responding entirely to the tone set set by this Government. We have flogged off our national assets, whatever they may be, to the highest passing bidders, whoever they may be. We have sacrificed long-term interests for a little short-term profit. The Government are not creating an enterprise culture but are rather in the process of creating a finance culture. The Government have stimulated not entrepreneurial skill but the skill of the moneychanger. There are those who are reaping vast rewards, and they are not the hard grafters but the slick operators.
It may be that the banner headlines on this debate will be about corruption, but the real scandal is far deeper, more pervasive and more damaging. The Government have elevated private greed to the level of a public virtue and the City, not unnaturally, has responded with enthusiasm. It has become a partner with the Government in the game of national asset-stripping. Instead of mobilising its huge financial resources and its undoubted human ability in the interest of the long-term economic and industrial health of Britain, far too many in the City now grab at the short-term profit. They are not wholly to be blamed for this, because they are only responding to the climate that has been created by the Government. It is that climate that we would seek to change. We need a new climate if we are to establish the partnership the nation needs for the regeneration of British industry. The City is an essential part of that partnership, but it will need a change of attitude and of operation before it can do the job we so badly need it to do.

Mr. Geoffrey Rippon: This debate shows that there is growing public anxiety about what is happening in the City. Allegations of fraud and corruption may be grossly exaggerated, but I believe that the Prime Minister was right when she said at the Lord Mayor's banquet last year that the City was only as healthy as its reputation.
Today we have to face the fact that a number of major scandals have undermined confidence in one of Britain's most important spheres of activity. The City's very real achievements and its important contribution to the national economy have rightly been underlined by the Chief

Secretary to the Treasury, but those very achievements and the City's very importance make it necessary for us to understand exactly what is at stake. As the Roskill committee stated at the beginning of its important report:
If the Government cherish the vision of an 'equity-owning democracy' then it also faces an inescapable duty to ensure that financial markets are honestly managed, and that transgressions in these markets are swiftly and effectively discovered, convicted and punished.
I am sure that the House must welcome the very clear way in which the Chief Secretary emphasised that it is the Government's intention to act on the recommendations in that report and to come forward with firm legislative proposals. I do not think that we can ask for more than that.
I welcome the measures which, as the Chief Secretary has said, the Government have taken and the measures which they propose to take. This is in striking contrast to the way in which the Labour Government treated these matters when they had the opportunity of dealing with them. Whether, however, they will, in the changed circumstances of today, prove adequate has to be considered in the light of what may happen after October, when the so-called big bang occurs.
Huge financial conglomerates are now being created and it may be doubtful whether self-regulation will be enough, especially when the Bank of England stands back and allows unbridled market forces to operate in areas where they have hitherto been effectively controlled. I am all in favour of market forces but I believe that they must be subject to regulation within a clear statutory framework. Whether we can long avoid a statutory body on the lines of the United States Securities and Exchange Commission depends on our ensuring that the Financial Services Bill has strong enough teeth.
Naturally, I am not going to refer to what is happening in Committee. I will confine myself to saying that I hope that the Government will hesitate before ignoring the views expressed by my hon. Friend the Member for Chichester (Mr. Nelson) and others, because I believe that it is certain that, if there is another major scandal, the roof is going to blow off the City.
I shall now refer to a topic which I touched on in the debate on the Gracious Speech on 13 November—the damaging consequences of the current torrent of takeover bids. In 1969 I said that the country had gone merger-mad in the face of the 1968 wave of takeover bids, most of which proved basically unsatisfactory and damaging in the event, just as I think many of the mergers today will not prove in the national interest. As a Wall street banker said recently:
When total bids multiply to the level of a roulette table they are better housed in a casino where the only consistent winners are the croupiers.
The hon. Member for Yeovil (Mr. Ashdown) referred to the fact that at the end of last year it was estimated that there was over £7 billion wrapped up in bid situations. It was then estimated that 52 out of 300 United Kingdom companies capitalised at over £150 million each were involved in takeovers. This process is continuing at the present time.
I must, of course, declare an interest as the chairman of a company which has recently escaped the clutches of an unwelcome predator.
What is happening in the City today in the sphere of mergers is utter madness. I noted that the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley)


referred to the views of Mr. David Walker, an executive director of the Bank of England. I believe that Mr. Walker is absolutely right when he says that there must be a rethink of our merger policy, and that rethink is urgent as well as, admittedly, very difficult.
The root of the public mischief is that shorter horizons are militating against sensible long-term investment decisions, and are therefore in the long run basically damaging to British competitiveness. Institutional shareholders increasingly regard share certificates as casino chips, and the performance of investment managers is judged on short-term capital gains. The institutional shareholder is therefore no longer necessarily a buttress to a good company; rather, he may be a danger. On the other hand, individual shareholders are much more stable because they understand that they as well as the country are better served in the long term by the steady growth of their company, its profits and its dividends. What is happening today in the City is economically unsound because it is basically destructive and antisocial.
That is why I welcome what the Government are doing to encourage the spread of share ownership. That spread is essential to a free society increasingly threatened by the concentration of power. The concentration of power is not just in the hands of Government or state boards; it can be to an excessive extent in the hands of large bureaucratic corporations.
No one can stop takeover bids and no one would want to, but the message should go out to the City: "For heaven's sake cool it." A distinction must be made between mergers by agreement which stimulate organic growth and hostile bids that are designed to promote egomaniac empire building or disguise indifferent performance by the larger company. We should consider ways and means whereby the public interest and the interests of shareholders can best be protected. It seems that we need some new ground rules. On 7 March an article appeared in The Times that referred to
the deterioration of standards in the conduct of takeover bids.
It noted the readiness of various financial institutions to underwrite to make contested bids possible—it seems that takeover bids offer an alternative way of lending money now; it is no good lending money nowadays to Nicaragua — and to take huge fees and commissions from the companies involved.

Mr. John Ryman: I am following the right hon. and learned Gentleman's speech with great interest. He talks about the public interest and concedes that substantial reform is required. Should not the Director General of Fair Trading, some of whose decisions are incomprehensible, be taking the public interest into account when deciding whether to make a reference, for example, in the Guinness No. 1 and No. 2 bids, the Hanson Trust bid, which got away, and various other bids? Surely the public interest is paramount even before there is new legislation.

Mr. Rippon: There is no doubt that the Office of Fair Trading and many other bodies should be much concerned about these matters and that is why I have something to say about laying down possible ground rules. One way of discouraging unjustified bids would be to make the predator who failed pay the costs of the defence. We should also prohibit the growing practice of making unsolicited telephone calls—personal calls — to shareholders urging them to accept bid offers. In the case

in which I was involved, I found that elderly shareholders had been harassed late at night by individuals of whom they had never heard, and of whom they had no wish to hear.
On a wider scale, we could study action that is being taken in other countries to regulate mergers. In America, another country which suffers from merger mania, a number of states have begun to take action, including Minnesota, Ohio and Colorado. In Colorado, for example, an independent board of directors has to vet a bid for a financial institution and a 25 per cent. holding is deemed to be a change of control which it will investigate. In Minnesota, the single most important component of its company law is the requirement that acquiring companies should disclose their operational plans for the target company.
In Germany, a company's workers have an absolute right to be consulted on decisions that will have an effect on their future, such as mergers. In Canada, action is being taken to introduce a new trust law that will automatically refer to the equivalent of our Monopolies and Mergers Commission all bids in excess of £250 million. It may be that, instead of the present unsatisfactory arrangement whereby some bids are referred and others are not, it would be better to have some point at which it became essential that the bid should be referred.
As the evidence accumulates of the economic and social damage which is being done by the spate of hostile takeover bids, we must do something before outraged public opinion turns upon the City in fury at its speculative, share-shuffling greed.

Mr. Brian Sedgemore: There was a good deal in what the right hon. and learned Member for Hexham (Mr. Rippon) said with which I agreed, and perhaps that proves the point that Sir Winston Churchill wished to make when he said, "We are all Socialists now." However, I believe that the right hon. and learned Gentleman omitted one precept, which is my contention that we shall never be able to regulate the City unless we can regulate the activities of the inhabitants of No. 10 Downing street in so far as they affect the City. We first realised that there was something wrong at No. 10 a couple of years ago when the Oman scandal came to light. The Prime Minister, in batting for Britain, helped to line the pockets of her son. When the subsequent contract between the Oman Government and Cementation Ltd. was signed, millions of pounds of bribes found their way into the hands of Oman Ministers.
The Johnson Matthey banking scandal—

Mr. Deputy Speaker: Order. The hon. Gentleman knows that this is a short debate — I know that the House does not want to be delayed by interventions from the Chair—and that he should not make accusations of that kind. He should table a substantive motion if he wants to make such accusations.

Mr. Sedgemore: These issues have been raised before on the Floor of the House, Mr. Deputy Speaker, and evidence on them has been given to a Select Committee, notably by myself, which has been published. It is a pity that the Government have not brought the Select Committee's report before the House. However, I shall move on.
In the Johnson Matthey banking scandal, the Prime Minister found herself in further trouble. Thanks to Price Waterhouse and Co. and a Minister, I have been able to piece together some of the right hon. Lady's personal involvement in not setting up a tribunal of inquiry to consider the matter. When Price Waterhouse was drawing up its original report — the one that has not been published—one of its senior partners, Mr. Brian Larkin, in conversation with another senior member of the firm, Mr. Mark Homan, said as the report was nearing completion, "We had better contact No. 10 and get her to distance herself from him." In this instance "her" was the Prime Minister and "him" was Mr. Robin Leigh-Pemberton, the Governor of the Bank of England. The conversation was designed to suggest that as the Prime Minister was friendly with the Governor and had appointed him, and as he stood most to lose from any sort of inquiry, the Prime Minister should be warned about what was going on.
That fitted in with what a Minister told me when he said that when he read reports he realised that there was fraud. He wanted an inquiry but it was not possible to have one because the Governor of the Bank of England got at the Prime Minister before anyone else could.
I understand now why the Prime Minister and the Chancellor of the Exchequer have been unhappy with attempts to expose what has been going on by people such as Mr. Abdul Shamji. What do we know about Mr. Shamji and what are the objections that the Prime Minister and the Chancellor of the Exchequer have to us talking about him in the House?
We know that in the late 1950s Mr. Shamji was engaged in gold and diamond smuggling in the Belgian Congo, in the area which is now on the Ugandan-Zaire border. We know that a few weeks ago a High Court judge, Mr. Justice Hoffmann, called him a liar when making orders against his company amounting to £21 million. We know that he supplied women and flats to bankers, including Mr. Ian Fraser, of Johnson Matthey Bankers. We know that an Asian woman had to seek protection when she found herself and her family under threat by Mr. Shamji's mobsters because she would not hand over documents relating to JMB.
We know that Mr. Shamji contacted one of my informants and said that he would not expose borrowers and bankers at JMB if I would keep him out of the frame. We know that Mr. Shamji was fined in Scotland recently for breaches of the Companies Act. We know that he stole $3 million in relation to Gomba Exim. We know that with the help of his family he burgled his own safe deposit boxes in London. We know that, when the liquidator went in and some of the safe deposits were eventually opened, works of art were found and there was no record of them in the books. This all relates to the liquidation of JMB.
We know that Mr. Shamji had ships on the high seas which had inadequate lifeboats. We know that when Touche Ross and Co. provided a record of his accounts, it was clear that he was not paying tax. We know that Mr. Ivor Fallon, the deputy editor of The Sunday Times, obtained certain favours from Mr. Shamji and that in return The Sunday Times wrote some false stories about him.
Why do not the Prime Minister and the Chancellor want those things to be exposed in the House? First, it appears

that Mr. Shamji is their kind of person; he is actually one of them. Secondly, it appears that he has given a lot of money through his companies to Conservative party political funds. When I was in Florence recently, someone asked me what the difference was between the British and Italian political systems. I replied, "That is easy. In Italy members of the Mafia are brought to trial, but in Britain they become vice presidents of the Conservative Small Business Bureau."
I move to the third inhabitant of No. 10 Downing street who is concerned with massive fraud in the City undertaken by the largest bank in Britain, the National Westminster bank. The matter concerns Mr. Denis Thatcher who is one of the beneficiaries. The victim, who is in the Strangers' Gallery today, is Mr. Alfred Cullinane, and the fraudster is the National Westminster bank. Denis Thatcher owns 3,000 shares in Attwoods, or did according to the last company accounts, and is stated to be a vice-chairman of Attwoods, a firm which deals in sand and gravel and waste disposal. When that firm was recently indicted by the grand jury in the United States of America for price fixing, someone in the company was at pains to point out that it had no connections with the Mafia.
On 30 June 1983 Attwoods took over E.F. Philips, a firm which held 40 acres of land. Not to put too fine a point on it, Attwoods received stolen land. Attwoods and those who have any interest in it are to some extent living off the ill-gotten gains of the National Westminster bank and its wholly owned subsidiary, Lombard North Central.
I have studied bundles of documents and court cases which have finished, and I have found that the conduct of both banks has involved dishonesty, deception and conspiracy with a leading firm of accountants, Thomson McLintock, to destroy Alfred Cullinane's business, and the swearing in the High Court of a false affadavit by a bank manager of the National Westminster bank, Mr. Brian Thomas. The banks stole Mr. Cullinane's land and sold it at a fraction of its value to E.F. Philips, which almost immediately disposed of a dubious title to Attwoods.
Alfred Cullinane is a brillant engineer who developed a new resin coating process. He should be a millionaire today but instead he is a pauper. Over a 15-year period, his life and his business have been destroyed and most of his friendships have been broken up; his wife Eileen has been subjected to cruel agony. He is a 74-year-old man who has tragically been the victim of a land fraud. As it happens, the Prime Minister's husband is one of the beneficiaries of that land fraud. The House should ask what the National Westminster bank, Lombard North Central, and the Prime Minister and her husband intend to do about it.
In 1965 the National Westminster bank loaned Alfred Cullinane a small amount of money and took a charge on some 500 acres of his land. In 1971 Alfred Cullinane wanted to expand his business and asked the bank if it would release 63 acres of that land, valued at £1·2 million, upon which the machinery for his resin coating process stood. In return for that he told the bank that he would give it an extra 40 acres, valued at £800,000, on which it could put a charge. The bank agreed to put the charge on the 40 acres of land, but it did not release the 63 acres which it had promised to Mr. Alfred Cullinane.
When Mr. Cullinane won a case in the Court of Appeal in 1982, the Master of the Rolls, Sir John Donaldson, was bitterly critical of the conduct of the National Westminster


bank. He said that when the bank discovered that it had not released the 63 acres of land it said, "Whoopee, we have got another of Mr. Cullinane's assets." In 1977 Mr. Cullinane's business had been ready to expand, but from that time on the National Westminster bank and Lombard North Central decided not to provide him with any working capital but to pull the plug on him and consciously to destroy his business.
In 1978 Lombard North Central suggested to Thomson McLintock that it should prepare an independent report and that Mr. Cullinane should meet half the cost of preparing the report. Unknown to Mr. Cullinane, the firm prepared a confidential report — I have seen the full report — for Lombard North Central. It presented a slightly different report to Mr. Cullinane and at the same time it offered to help the bank destroy Mr. Cullinane's business. A High Court judge subsequently described that report as not being worth the paper it was written on.
Even more amazingly, while the Court of Appeal was dealing with the case in 1982, Lombard North Central was actually in the process of selling off the 40 acres of land involved in the court case to E. F. Philips, which almost immediately sold it to Attwoods. I find the conduct of E. F. Philips and Attwoods in buying the land at that time, with the litigation in progress, most extraordinary. The title which passed was almost certainly fictitious and false. However, if one is getting a bargain at basement prices, presumably one does not ask too many questions. Perhaps I should point out that by that time Lombard North Central had obtained a charging and possession order on the land on the basis of the earlier shenanigans.
So the largest bank in Britain, with offices in the centre of the City, was responsible for one of the most cruel frauds that we have ever seen. It was not a monetary fraud. The victim is in the Strangers' Gallery. If Conservative Members want to talk to him, I invite them to do so after the debate. On 9 August 1984 Alfred Cullinane wrote to the Prime Minister — I have a copy of the letter — to explain her husband's involvement. She never even bothered to reply. I find that slightly odd.
There are two other odd circumstances in the case. In 1977 a firm called Steetley had agreed to come in with Mr. Cullinane. At the last moment, for reasons no one has been able to find out, it dropped out. Steetley had someone on its board concerned with the National Westminster bank; also, the chairman of Steetley was Lord Boardman, who is today the chairman of the National Westminster bank.
Perhaps even more extraordinary, in 1984, in a letter to Mr. Cullinane — again I have the letter here — a Katangan mercenary, Mr. Einar-Cynewolf, alleged that a Mr. Arthur Young, a regional director of the National Westminster bank, had asked him to kill Mr. Cullinane. Mr. Cullinane sent the letter to Dorset police. The investigation by the police was indeterminate because Arthur Young died. My investigation is complete. I assure the House that no contract was taken out to kill Mr. Cullinane, but we can imagine the pain that that caused to Mr. Cullinane and to his wife. I shall write to Dorset police so that they may deal with the Katangan mercenary as they think fit. My evidence is conclusive. I discovered the facts only on Friday. I immediately telephoned Mr. Cullinane and I shall inform Dorset police. Perhaps Lord Boardman and others concerned with the case will be grateful that I have gone to the trouble to solve that riddle.
I have raised the matter in the debate because the National Westminster bank wants to bankrupt Mr.

Cullinane. Then he could not go back to the courts to seek redress on all the curious events so that he may enjoy life in the future. The creditors want to do that on Monday.
Although Mr. Cullinane is 74 years of age, he is very articulate. I might add that he is a Tory, and a millionaire twice over. He has been reduced to a pauper by Britain's biggest bank which would like him to die.
Mr. Alfred Cullinane should not be made bankrupt, nor should he die. The National Westminster bank, Lombard North Central, Attwoods, Denis Thatcher and perhaps even the Prime Minister should use their influence to see that Alfred Cullinane and his wife Eileen have a decent future. We should regulate the City, but in the end it is the ideology that counts. Those at the top of the British establishment bear a heavy responsibility if they produce an ideology that allows the National Westminster bank to act in that way.

Mr. Anthony Nelson: The hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) seems to make new revelations whenever he speaks on this subject. I have no complaint about his right to do so, using the privilege that we have to expose particular matters, but as none of us are privy to the details of this case, we are not in a position to comment on his allegations. It is, of course, open to the hon. Gentleman to decide whether he should make statements outside the House that are similar to those that he made in the Chamber today.
I return to the thrust of the debate, and should like to pay a compliment to my right hon. Friend the Chief Secretary. He struck the right balance in recognising that there are problems with the development of new activities in the City and with the scale of investment and banking transactions. It is right, too, to recognise the City's pre-eminent contribution not only to our national income and to our balance of payments, but to employing people and to invigorating industry in this country. The City has an outstanding record that has been succoured by many of the policies introduced by the Government since 1979. In the forthcoming Budget I hope that there will be yet further measures to liberalise those talents and to promote the profitability not only of the financial services industry in the City but of the manufacturing and services industries that it sponsors.
However, it is no part of my remit or, perhaps that of my hon. Friends to kill the goose that lays the golden egg. In considering very technical reforms and changes in the City, whether to the banking sector or to the investment markets, we must recognise our difficult but proper responsibility to strike the right balance between ensuring that the profitability of enterprises making such a valuable contribution to our economy are not in any way prejudiced.
A banking review is being conducted. I have long felt that the Banking Act was defective in the tiered system that it set up. It is sad that it took the revelation of a financial default to expose that. However, I am glad that we are to return to a much more rational basis for the supervision and authorisation of our banks.
I also welcome the fact that the Government have announced an inquiry into Lloyd's. As I have argued before, that is preferable by far to its inclusion in the supervisory framework of any Bill that the House may be considering. The sober assessment of the review, and the consultation that will presumably ensue, together with the


opportunity that many of us will take to give evidence to Sir Patrick Neill's committee, will ensure that any recommendations that follow, in the form of a private or public Bill to replace the existing Lloyd's Act, or in the form of new regulations promulgated by the Lloyd's ruling council, will stand a far better chance of working and of ensuring that Lloyd's regains the prestige and international reputation that it so richly deserves. In that way, we may be sure that Lloyd's will continue to make a contribution not only to the security of many policyholders and industries that depend on it, but to our national income and balance of payments.
I wish to concentrate on the regulation of the investment markets. The Government have made significant progress in responding to public and parliamentary opinion, and in proposing a regulatory framework that will ensure that many problems that might arise after the big bang do not, in fact, do so. I fear that after the big bang a good deal of shrapnel will fly around, that many people will be injured, and that the streets of the City, which are paved with gold, may also be covered in blood. That may be a rather lurid metaphor to use, but we have a heavy responsibility to get that regulatory framework right. That is within our competence.
I say to Opposition Members and particularly to the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) that much of their dogmatic prejudice, as displayed in their speeches, serves only to fuel the view that the Labour party has moved on little since its ideological views of the 1960s and 1970s. We should be concentrating on those things that Parliament can do, and that are within its competence. For example, we could set up the right framework for the supervision— not the regulation—of the investment industries in this country. I include in that the broad remit of investment activities from the best known broking of stocks and shares right through to more novel markets, such as the futures markets. It is important to get it right, primarily because many more people now have a propensity to save and invest and will, for the first time, be investing, and responding to the overtures of people who knock on their doors, advertise through the press, or invite them by mail to use their services.
In those circumstances, people will be vulnerable. However much we may preach the dictum of caveat emptor, people will undoubtedly lose out sometimes, not only because of their poor investment choices but because there may be bad administration and trusteeship of their funds. We cannot provide by statute any absolute protection against that, but we must do our best to ensure that they are at least provided with information, that the people with whom they deal are authorised and competent, that they have the ability to appeal and to seek redress and restitution if they have been improperly dealt with, and that the system is sufficiently flexible to allow for changes in these markets. The framework provided in the Financial Services Bill achieves that. There is one major area in which change is necessary, however. A slight shift in the balance would ensure that we had a durable and flexible system that would enjoy all-party support rather than sectarian governmental, and possibly only partly governmental, support. My colleagues will know that I

refer in particular to the status of the Securities and Investments Board which is now implanted in the Financial Services Bill as a statutorily recognised body.
In the press, to some extent in the City, and also outside the House, there has been a misunderstanding about the implications of that change. The change does not in itself go very far, but it statutorily recognises a body to which, to all intents and purposes, the Secretary of State for Trade and Industry intends to delegate his powers. Like me, he has an interest in ensuring that it discharges its functions effectively. The legislation will ensure that the Securities and Investments Board has a place in law and statutory authority to do its important job.
A statutorily recognised Securities and Investments Board will act as a much better defence for the future security of self-regulation in the City than a rather uncertain system of discretion and flexibility which lies in the hands of the Secretary of State for Trade and Industry. A future Government of a different political persuasion might easily sweep aside—if the amendment made to the Bill is reversed—the fragile structure of supervision provided in the Bill, as first introduced.
As amended, the statutorily recognised Securities and Investments Board will ensure that we have a bulwark for the system of voluntary self-regulation among the various bodies such as the stock exchange, the Association of Futures, Brokers and Dealers or the National Association of Securities Dealers and Investment Managers, and that we have the independence of a statutory body. It will thus be less subject to the influence of a Secretary of State in any future Government. To that extent, a body recognised in law, with a clear statutory responsibility and accountability, is a preference that the House should consider with an open mind.
There are political arguments for making a change such as this in a way which takes account of what is happening in other sophisticated financial markets. In a world where people can choose in which market they buy and sell their shares, and where they seek common standards of freedom and fairness in the discharge of their contracts and orders, it is important that we pay some regard to the systems that work and that have been introduced elsewhere.
Many of the countries that have recently charged or are changing their systems are introducing statutorily recognised bodies along the lines of the one proposed by the Standing Committee considering the Financial Services Bill. Furthermore, while some Members on both the Government and the Opposition Benches may be suspicious of all-party agreement on these matters, or indeed of the following of a middle way, I believe strongly that in that way we would serve the practitioners in the City and investors outside who want, and are entitled to expect, a durable system which will not be subject to change at the whim of some future Government. We are much more likely to have such a system if the Bill, when it returns to the House, proceeds with all-party support than if we have divisions not just across the Floor of the House, but in the ranks of the Tory party.
We shall have such division, because I will not be a party to a flimsy system that fails to match up to either the pledges that I made to my electorate at the last election or to what many of us have argued for in debates on this subject.
As it stands, such a body, recognised in law, would not amount to the full panoply of an American-style Securities and Exchange Commission. It is for that very reason that


we have sought this limited path of recognition and authority for the Securities and Investments Board. There is no question of that arising, in any case, because the system, for example, of administration of takeovers in this country is largely outside the remit of the Financial Services Bill; and the history of the Securities and Exchange Commission in the United States, built on the Securities Act of 1933 when there was no system of self-regulation in the United States, is radically different and not comparable.
For that reason the rather alarmist approach of previous Ministers at the Department of Trade and Industry and of some commentators in the market towards a statutory commission, for fear that it would emulate the SEC, is misplaced. What is correct is to recognise that opinion in the City and among the public at large has moved not only quite markedly but rapidly on this matter. Most progressive and responsible opinion in the City of London at present recognises either that a statutorily recognised Securities and Investments Board is needed now or that, if it is not needed now, it is inevitable anyway.
If that is the case, surely we ought to grasp the nettle. We ought not to lag behind public and practitioner opinion, we ought to be ahead of it. We can already learn from the experience of the Lloyd's Act 1982. When the Lloyd's Bill was going through the House, and when novel and quite controversial amendments were proposed to that Bill, many of us were castigated by opinion outside, in Lloyd's and in the City, for going too far, for imposing unacceptable changes, yet no one would now seriously suggest, in the light of events, that the Lloyd's Act has gone too far; in fact its provisions are being reviewed.
It is a fateful thing to fall behind public, practitioner and investor opinion by enshrining in law a framework which fails to match expectations and is unlikely to measure up to the challenge.
I turn to a few technical ways in which statutory recognition of the Securities and Investments Board, quite apart from the political arguments that I have adduced, will help it to discharge its responsibilities. It should, first, be able to investigate insider dealing. Insider dealing is an outrageous practice which materially and prejudicially affects the interests of shareholders who are not privy to information, and can involve substantial losses for individuals and shareholders at large. While the Companies Act 1981 made it a criminal offence, the definition of insider dealing had inevitably to be narrow in order for it to be an acceptable criminal offence.
Thankfully, however, the stock exchange and other organisations, in their definition of insider dealing, went further than the Companies Act. This is just one example. When we have established the Securities and Investments Board as a statutory body, there will be every reason for it to have the right to investigate insider dealing. Not only is it not going to do so, it will not be allowed the powers to do so. Yet most people outside the House think that such a body ought to have, and will have, the powers to do so. And so it should.
Nor will the board have the power to investigate unauthorised investment businesses. Why not? Most people outside the House feel that we are instituting or ought to institute a system which will look not just at the good boys and their day-to-day practices, but at the bad boys and whether they are involved in activities in which they should not be involved. The fact that the Securities and Investments Board cannot investigate whether an

unauthorised business is acting in such a way, cannot ask unauthorised concerns or people for information about tied agents of investment insurance companies, or indeed èsk authorised businesses, is a defect that we ought to put right if we are serious about investor protection.
In this, and a number of other limited ways, we can ensure that not only will we have a framework of a technical and practical kind for fulfilling the tasks set for the board, which I believe all Members would like to see, but that we will be sending the right message to operators in the City and outside and to the country at large that we mean business about investor protection, and intend to stamp out some of the worst practices that we have seen.

Mr. Hugh Dykes: Would not my hon. Friend agree that, with our hon. Friend the Member for Beaconsfield (Mr. Smith), he has done a great service in highlighting this in Committee?

Mr. Deputy Speaker: Order. I do not know whether the hon. Gentleman was here, but Mr. Speaker reminded hon. Members that they must not discuss proceedings in the Committee.

Mr. Dykes: I was in the Select Committee at the beginning of the debate, Mr. Deputy Speaker, and was not aware of that. I apologise. Getting away from that, more and more people in the City appear to support the line taken by my hon. Friend, including members of the stock exchange. As my hon. Friend was beginning to imply earlier on, it does not change the intrinsic basis of self-regulation, but it does provide the extra reserve powers for a body that would be more powerful because it was lodged in statute, so that it could thoroughly investigate, and turf out troublemakers if necessary.

Mr. Nelson: I am obliged to my hon. Friend because he has said succinctly and persuasively what I feel. Like him, I have up to now felt that the Securities and Investment Board was likely to be not so much a toothless tiger as a chained tiger. I do not suggest that if it is statutorily recognised we shall have a wild animal on the loose, but we shall have a body that will be equipped, empowered, recognised and sufficiently accountable to fulfil the remit for which there is a consensus in the House.
With that limited reservation about what I understand to be the Government's present intentions, I reiterate my belief that this Government have done more than any other to ensure that we have a responsible, free and fair market in the City of London, which continue to contribute to the vibrant prosperity of our national income. If the Government will only see their way to making this rather limited but absolutely vital further move, they will enjoy a consensus and a support not only throughout the House but among a wider and deserving public in our constituencies.

Mr. Tam Dalyell: The hon. Member for Chichester (Mr. Nelson) has put before the House a thoughtful, well-argued and well-presented case. He will, I hope, forgive me if I do not answer him, because it is to the speech of the right hon. and learned Member for Hexham (Mr. Rippon) that I should like briefly to turn.
I wish not to embarrass the right hon. and learned Gentleman, but if, when I first arrived here in 1962, I had been asked to put money on who would be the leader of a Conservative Government some 24 years later my money


would have been on the right hon. and learned Member for Hexham, who was then, I believe, the Member for Norwich, South. I have always believed him to be, and I still believe him to be, a deeply serious man. Whether or not one agrees with his opinions, they are always put forward in an informed way.
Therefore, I say both to Conservative politicians and to those in the City that they had better read the vehemence with which the right hon. and learned Gentleman made his criticisms this afternoon. It was a devastating intervention, and in my view a justified one. If it had come from this side of the House, the City might have said, "Oh, well, it's just the Opposition at it again." It is not the Opposition at it again. There is real worry in the country. To borrow the phrase of the right hon. and learned Member for Hexham, if there is another scandal, or series of scandals, the top will come off.
I have never been guilty of extravagant criticism of the City of London, and I say bluntly to my hon. Friends the Members for Bolsover (Mr. Skinner) and for Hackney, South and Shoreditch (Mr. Sedgemore) that I have some friends in the City. But they must take heed of what the right hon. and learned Member for Hexham and other serious hon. Members have said this afternoon. I did not hear Conservative Members giving very much support to the City of London.
I shall stick briefly to one subject that concerns me greatly, the situation faced by the electronic components industry in this country. I say to the Chief Secretary to the Treasury that the industry, which includes firms such as Hewlett-Packard and Ferranti, has briefed us that, compared with its French, American and Japanese competitors, it does not receive anything like the help from the financial institutions of this country that its foreign competitors receive from theirs.
Electronic components are the building blocks from which all electronic equipment is assembled. Electronic components are increasingly the key to the efficiency and competitiveness of manufacturing industry across the board. Electronic components are essential to communications, finance, insurance, retailing and all service industries. Jobs in all these industries, now and in the future, depend on electronic components—half a million jobs in electronic equipment industries, millions more in manufacturing and service industries using electronics, not to mention some 70,000 jobs in the components industry itself. There are jobs in almost every constituency up and down the country.
Britain must have a strong components industry. Without it, electronic equipment makers would be dependent on overseas suppliers, often their direct competitors. British firms would be second in line for delivery of the latest components. They could suffer from political control over the export of technology. Incidentally, our normal defence capability would be at risk.
Above all, our future ability to provide jobs for British men and women would be undermined. The United Kingdom's share of the vast and growing market for components is static. Imports have increased faster than exports. Our balance of trade is heavily in the red. Why is this? What can be done? What can be done concerns, in large part, the City of London.

World markets are distorted greatly to Britain's disadvantage — by structural factors, by deliberate policies of foreign Governments who have understood the critical importance of electronic components to their economic future. The United States has a vast, largely captive, market supported by massive spending on defence and space. The Japanese insulate their home market from competition, and from a basis of strength, particularly in consumer electronics, target their attack on overseas markets.
Equipment and component producers are dependent on one another. It is in the equipment industry's best long-term interests to support the component industry by discussing future needs in good time and looking first to British suppliers. We seem to make these decisions hastily, on an ad hoc basis and higgledy-piggledy.
The attitudes of the Japanese and United States financial communities differ from those of the City of London. They support high technology, they venture capital at high risk and they look for returns in the long term. Normal investment guidelines hardly apply to high technology components. Competitor nations realise this. In 1984, the West German government's support for investment in micro-electronics was 60 per cent. more than ours, and that of the French Government 400 per cent. more than ours. The German and Dutch Governments are providing £119 million to two firms to develop and make just two devices, compared with the British Government's £120 million over six years to the whole micro-electronics industry. All our competitors' public procurement policies are strongly nationalistic.
The British Government must help to enable our industry to compete on more equal terms by consistent policies that help British industry. Not only must the Government give direct support to micro-electronics on a scale more like that given to our competitors, but they must not put existing jobs at risk by subidising foreign companies to manufacture products which our existing industry can supply. The City has to understand this, because industries, particularly those in the north, will suffer dreadfully if it does not. Not only must the Government use public procurement to support, not undermine, our industry; they must also understand that a healthy electronics components industry is fundamental to our performance as a country. The City has a major contribution to make. Therefore, I hope that the City and the Government will get together on this.
By good fortune, I have tomorrow been allocated a Consolidated Fund debate on the related question of the strategic defence initiative and SDI research and the British Government's attitude to what is seen, by some, as an American crock of gold—albeit illusory. This has to be taken in conjunction with the fact that our capital markets are not nearly so helpful to our industries as the Americans are to theirs. In these circumstances, we have to be wary about Americans coming over here, like the unmentionable Mr. Clarence Robinson.
Frankly, this is all about the way in which Americans, under the guise of making security checks, can take the most advanced developments in British industry, not least in optical electronics and the like. This has come about partly because access to finance in the United States and Japan is so much more favourable than it is in Britain.
Without, therefore, being strident about it, I plead with the City first to take into account the problems of the electronics industry that I have mentioned; and, secondly,


to cast a critical eye over what is happening in this important field of SDI research and a somewhat bewitching American offer.

Mr. Tim Smith: This debate is not just about the City of London but about the financial services industry as a whole. We have already heard about the number of jobs in the financial services industry. They are in excess of 1 million, a number that has risen rapidly during the past few years. We have also heard from my right hon. Friend the Chief Secretary to the Treasury about the overseas earnings that are generated by the City. In 1984 they amounted to over £6 billion. That is another figure that has risen rapidly in a very short period. All hon. Members know that the City serves as the primary capital market for industry and commerce. As my right hon. Friend said, last year new issues exceeded £6 billion.
The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) referred to current salary levels in the City. I wish to make a few comments about that matter. It is obviously a period of rapid change and great opportunity in the City. The world's leading investment houses are taking advantage of deregulation to enter the London market. As a result, it is a period of extremely fierce competition for business, and, because it is a people business, for people. Inevitably, in those circumstances demand exceeds supply, and salaries have risen accordingly to levels which seem difficult to justify in absolute or comparative terms. However, they are entirely justifiable in market terms because nobody pays a higher salary than necessary to attract the person whom he wishes to employ. After the big bang there will be a major shakeup. It is not to use particularly lurid terminology to talk about there being blood on the floor because that is exactly what will happen, and salaries will fall to more sustainable levels quickly in 1987–88.
Obviously, it is critical that at a time of intense competition and major upheaval we should have adequate regulation of the financial services industry. That will both improve prospects for investor protection and act as positive encouragement to the development of markets. That is why the Government's Financial Services Bill is so welcome. It provides a comprehensive framework of statutory and self-regulation designed to meet both those objectives. As my right hon. and learned Friend the Member for Richmond, Yorks (Mr. Brittan) said of the City on Second Reading in January:
there must be no doubt about the integrity of its institutions because once that doubt takes root it is only too easy for the customers of the City to take their business elsewhere."—[Official Report, 14 January 1986; Vol. 89, c. 940.]
I suspect that he was referring to businesses which operate in the City, but it is equally true of the institutions that are being set up under the Bill's framework. The key institution to which my hon. Friend the Member for Chichester (Mr. Nelson) and others have referred is the Securities and Investments Board. The SIB will authorise some investment businesses directly, will recognise self-regulatory organisations and professional bodies, and will make model rules for the conduct of business which will apply to all investment businesses. In other words, it will have an absolutely pivotal role. There must be no doubt about its integrity or credibility, yet at present it is envisaged that it will be a private company limited by guarantee. By virtue of its status some powers which

should logically be delegated, cannot be. For example, while it would be possible for the board to investigate the affairs of authorised investment businesses, it could not investigate the affairs of investment businesses which are not authorised. That is clearly a major anomaly arising from the board's status.
The Government argue that the board's private status gives the whole structure a flexibility that would otherwise be lost, but that flexibility is largely illusory in practice. Furthermore, those provisions that give it flexibility undermine its independence, which, in terms of its integrity and credibility, is far more important.
My hon. and learned Friend the Under-Secretary of State for Trade and Industry said that the most important and fundamental disadvantage of a statutory commission involves resources. Recently, to prove his point, he gave some examples of commissions which have been set up in other countries. He said that, whatever the theory of the matter, in practice resource constraints always have an impact on public sector statutory bodies. Unfortunately, he completely overlooked the fact that we have a perfect example of such a statutory body, funded entirely by fees and under no resource restraints. It was established by the Government in the Local Government Finance Act 1982, and is the Audit Commission. My hon. and learned Friend was a little thrown by that information since he had said that the most important and fundamental disadvantage involved resources. So when the matter was raised again he shifted his ground and sought no longer to rely on the resources argument, but instead relied on the flexibility argument.
I believe strongly that the status of the Securities and Investments Board is important. I shall not rehearse all the arguments that my hon. Friend the Member for Chicester has already put so eloquently to the House this afternoon. Four points are absolutely basic. First, people in the City believe that a statutory commission will eventually come about. As that is so, should we not recognise the inevitable, and take account of it in the Financial Services Bill? Secondly, there is considerable support among Conservative Members for a strengthening of the board, and we have seen some evidence of that during the debate. Thirdly, my hon. Friend's example of the Lloyd's Act is illuminating. Only four years ago the Bill was going through the House and people were saying that it went too far. Now, presumably, nobody would say that, and most would expect the Neill inquiry to produce evidence to support the strengthening of that Act. Finally, there is the possibility of all-party co-operation. That was one of the major issues to which the right hon. Member for Sparkbrook drew our attention on Second Reading. He drew attention to a number of issues, including the exclusion of Lloyd's, but that issue was the important one and the main reason why he divided the House.
If we could reach agreement, and the City could see that there was all-party agreement for the measure and the status of the board, it would strengthen the Act-to-be and the regulations that would come afterwards. People would know that a message was going out from the House that we meant business. Earlier, I was criticised for having interests, and friends in the City, but I feel strongly that it is in their interests as well as those of investors, that we should make these changes. We have dual objectives: investor protection and market development. Therefore, it


will be in their interests to have a strong system of regulation, as many of them recognise already. I hope that the Government will provide it.

Mr. Dennis Skinner: Two or three features of the debate are fairly interesting. One is that hardly a speech of any duration from a Tory Member has supported the Government's line. Yet the Minister said that the Labour party was wrong to table the motion. A succession of Tory speeches have begged the Opposition for consensus. In other words, Tory Members accept that something is wrong and would like us to do something about it together. I hope that my hon. Friends on the Front Bench will not listen to their pleas when they say, "Let us find a sensible consensus—a sloppy approach—to the City, because then we shall play ball and everything will be all right."
The Government would like all-party agreement on City matters, but not on finishing off miners, or getting rid of millions of people in the industrial belts of the north, the midlands and even parts of the south-east. In those cases they want to be brutal and to put people on the scrap heap. Tory Members do not say to Labour Members, "Is it possible to reach all-party agreement to reduce dole queues?", or, "Can we reach all-party agreement not to increase prescription charges?" Yet today at least three of them have been bleating and asking to find such a middle way.

Mr. Campbell-Savours: Can I help my hon. Friend by saying that Conservative Members are calling for what we want and for what we are asking? It is not that they are seeking a compromise; they accept that there is a genuine need for a statutory commission. Therefore, I ask my hon. Friend not to see it so much as a compromise.

Mr. Skinner: I am afraid that I cannot agree with my hon. Friend. He sits on Select Committees which have a sloppy all-party approach to everything. I do not get involved in them. I would not accuse my hon. Friend of being a member of a Select Committee in order to go on all-party trips to the Caribbean in the middle of winter because he is not one of those who would do that, but there are plenty who would use them for that purpose and for many others. I shall not get mixed up in the idea that somehow we should bail out the Government because the voters in Fulham are fed up to the back teeth with hearing about the scandals in the City, whether it be from the Back Benches, the Front Benches or anywhere else. Not likely.
The debate has been characterised by another feature as well. I think that I will carry some Conservative members with me when I say that there has been nobody here from the Social Democratic party. Yet I happen to know that the Conservatives regard the SDP as a bit of a problem in the south-east. I do not know why. Throughout the debate not a single member of the Social Democratic party has been present and there has been only one Liberal—Paddy Backdown. Yet Mr. Speaker and every hon. Member will recall when the Leader of the Social Democratic party came here at Question Time and demanded a debate on the City week after week. But when it comes to the hard grind of carrying that out, where is he? He is trying to woo the voters in Fulham—I suppose—with the rest of them.

Mr. Ashdown: There is no point in your trying to do it.

Mr. Skinner: I have been out in Fulham and there is no problem there. I can assure the hon. Gentleman, who speaks for the Liberal party on occasions, and sometimes for the Social Democratic party as well—he is trying to do it today because he has had some advice from the economic spokesman for the Social Democratic party who wrote his speech—that I do not need him to tell me what will happen in Fulham. The people in Fulham know—

Mr. Ashdown: The National Union of Mineworkers does that.

Mr. Skinner: No, it does not do that. Ask the people in the NUM and they will tell you. They will find that fanciful in the extreme. Just look at my voting record on an incomes policy.

Mr. Ashdown: The NUM tells the hon. Gentleman what to say.

Mr. Skinner: I can tell the hon. Gentleman what I am not doing. I am not doing a Yankee speech for Sikorsky like he did. That is what I am not doing. I am not selling off British interests to the Yanks across the water and then coming in here mouthing about the sell-off of British Leyland. The man is a schizophrenic. He does not know whose side he is on.

Mr. Ashdown: Will the hon. Gentleman give way?

Mr. Skinner: No, get down.

Mr. Ashdown: rose—

Mr. Skinner: Get back.

Mr. Speaker: Order.

Mr. Ashdown: rose—

Mr. Skinner: No. Go and see Doctor Death. Go and see Basil.

Mr. Ashdown: The hon. Gentleman is frit.

Mr. Skinner: I am not frit. The hon. Gentleman is in the pocket of those people in that company. I wonder how much money the hon. Gentleman has made—

Mr. Speaker: Order. This is a debate about the City.

Mr. Skinner: He started it.

Mr. Ashdown: On a point of order, Mr. Speaker. Is it not a matter of some considerable concern when an hon. Member makes an accusation, such as that which the hon. Gentleman has just made, that I may have made some money out of that particular deal? Is that not a matter upon which we need your guidance? May I repudiate that unequivocally and say in passing that it is strange to find the hon. Gentleman on the same side as the large financial institutions on the Westland issue and against the unanimously expressed view of the entire work force?

Mr. Speaker: Order. I am sure that the House will agree that the hon. Member for Yeovil (Mr. Ashdown) is honourable, as indeed is every other Member.

Mr. Skinner: Let me remind the hon. Member for Yeovil (Mr. Ashdown), who says that I was on the side


of some consortium, that I made it plain in the House that Westland should not have gone to the Common Market consortium or to his friends in America; it should have been nationalised in the same way as Rolls-Royce was in 1971 when it ran into trouble. That was the answer and that would have provided more jobs for the workers in Yeovil than the tinpot system that the hon. Gentleman backed. In two or three years they will find out the errors of their ways.

Mr. Ashdown: Fifteen hundred to one.

Mr. Skinner: The hon. Gentleman is like the rest of the Tories. He is more concerned about looking after the casino economy than looking after those sections of British industry that have been hammered unmercifully throughout the past seven years.
The debate has been about the fact that the Government have at last acknowledged that in the pursuit of so-called monetarism in the industrial belts of Britain they have allowed the City to ignore market forces and have gone to the extent of intervening in eight or nine different ways so that the City did not carry out the philosophy of the Prime Minister.
We have heard so much about industry not going forward with a begging bowl, yet when it comes to the City the Government do not practise monetarism at all. They never have done. They have rigged the market from beginning to end. The easiest way to rig the market in favour of the City and the bankers is to have high interest rates in which the margin for error is so large that they are bound to make money. That is why bank profits during the past five or six years have been massive in comparison with previous years. That is one of the ways in which the City has never had to practise monetarism like the rest of British industry, the nationalised industries, local government services and all the rest.
The Government have managed to rig the City by intervening on a massive scale when the banks have run into trouble. I do not want dwell on Johnson Matthey Bankers, but the fact is that during that period when the banks were bailed out, especially Johnson Matthey with £100 million of taxpayers' money, the Government were telling the miners that the pits could not be kept open because they were uneconomic. The Government have rigged the market in favour of the City by encouraging the fraud squad to do nothing about following up all the crooks that have been making millions of pounds.
I said earlier that two people from the PCW syndicate in the City—Peter Cameron-Webb and Peter Dixon—are both living in the United States and have got away with £39 million. That is not my figure; it is what the Lloyd's investigation showed. A writ was served upon Peter Dixon a few weeks ago in America, but somehow or other our wonderful fraud squad cannot find that man in order to pursue this £39 million swindle. People on social security are hounded day in and day out by those people, but they cannot find people from the City.
Then there is the hiding of reports on the City. When the auditors went into Johnson Matthey Bankers there was a Price Waterhouse report. No Labour Member has ever managed to see what was in that report. Yet when it comes to Lambeth and Liverpool and an auditor goes in there over a matter of only £250,000 between 80 councillors, when it is not a matter of fraud at all but of supporting the services, what happens? The Government then encourage

the district auditor and all their friends in the Tory courts to hammer those 80 councillors because they were looking after their own people.
The Government have rigged the market in favour of the City on privatisation to something of the order of £3 billion. They do not practise monetarism there. There was no monetarism involved in the privatisation efforts. They simply went in there and picked up money for old rope. The abolition of exchange controls also favoured the City. it did not provide jobs in Bolsover, Workington or Yeovil, but it provided jobs overseas and made more money for the City. About £50,000 million was involved.
The Government have rigged the City by giving it many privileges. There are no ballots in the City. Trade unions must conduct ballots on almost every subject under the sun, but when it comes to Lloyd's, the Government say, "It is only a betting shop. We cannot have laws in there. We will have a system of self-regulation. They are all honest men, like Members of Parliament." What a laugh. [Laughter.] Hon. Members laugh because they have got the message. They are considered to be honest men, yet they have been making millions for donkeys' years. My point is that, during the past seven years, they have been able to make money more easily. With real interest rates over and above the inflation rate and the highest that we have ever experienced, the City has made money hand over fist.
Hon. Members have talked about insider trading. Let us suppose that workers could play about with insider trading. Can one imagine a trade union being involved in something like that? The Tory press would hammer at it daily — [Interruption.] The hon. Member for Beaconsfield (Mr. Smith) should listen. He is one of those who have made money from the City, as has the hon. Member for Chichester (Mr. Nelson). The latter used to be called one of the Slater Walker young blades. What happened to Slater Walker? The Labour Government picked up the pieces of that secondary banking chaos, but did any people involved with Slater Walker have to pay? Of course not. But the miners have been victimised; 500 or 600 of them cannot find jobs. No one in Slater Walker had his knuckles rapped. Members of Parliament were attached to the myriad of unit trusts that spread from one continent to another. That is why they have been able to rig the market.
One of the strongest weapons used by the Government to rig the market in the City so that it need not practise the philosophy of monetarism and market forces, as the rest of the British economy is expected to do, is that one in eight Tory Members of Parliament is a member of Lloyd's and some of the others are names at Lloyd's.

Mr. Ashdown: What about the hon. Member for Middlesbrough (Mr. Bell)?

Mr. Skinner: He answers for himself. It is none of my business.
In addition, my investigations show that one in three Tory Back-Bench Members is connected with the City. Friends of the hon. Member for Yeovil also have connections with the City.

Mr. Ashdown: There is one on the Labour Front Bench—the hon. Member for Middlesbrough.

Mr. Skinner: Listen to this, Paddy Backdown. The latest recruit to the City is the hon. Member for Stockton,


South (Mr. Wrigglesworth), who is economic spokesman for the Social Democratic party. He has joined Barclays bank, which is noted for some of the most lurid practices in the dark alleyways of South Africa. The hon. Gentleman is joined with people who support the apartheid system which operates against the coloured millions in South Africa.
One in two members of the Cabinet has had connections with the City at some time. This debate will not receive the reporting that it deserves because the Tory press, by and large, supports the principles put forward by Conservative Members.
During the past few years, not only Members of Parliament have sussed out what is happening. The electorate has suddenly realised that the Government operate double standards — that they have been hammering the workers for seven years, depriving them of jobs, and pushing up prescription charges by 1,000 per cent., while the racketeers and crooks in the City of London get away scot-free. Despite all the rigging, the electorate is beginning to discover the truth. That is why, in Fulham, the Tory party can get ready for the first of many defeats, leading to a general election in which the vast majority of the people will send them packing, as they should have done a long time ago.

Mr. Richard Ottaway: I feel quite exhausted Mr. Speaker. It is worth remembering, when the hon. Member for Bolsover (Mr. Skinner) talks about the ease with which money flows among countries, how easy it was for the NUM to move its funds to Luxembourg and Ireland.
Fraud in the City did not start in 1979, when the Government came to power. The first modern fraud was probably the tulip fraud of the 17th century, which was closely followed by the South Sea bubble fraud. The latter was primarily remarkable for the way in which shares increased fom £129 in February to £1,000 in August and down to £190 a couple of weeks later. Many people made money from it and many people lost money. I am told that a major beneficiary was the Prince of Wales. The Prime Minister, Robert Walpole, made enough money to refurbish his stately home. The Chancellor of the Exchequer made about £750,000—this was in 1720. Unfortunately one person who is reported to have lost money was the Queen's physician, who lost £80,000.
If one considers the frauds that have taken place during the past 20 years under Tory and Labour Governments one realises that they are affected not by party politics but by human nature. In 1966, the Stock Exchange Council disciplined six firms for
facilitating deals which could lead to tax evasion.
They were engaged in bond washing. The Times of the day commented:
Whoever is to blame in this unhappy chain of events, credit must be given to the Exchange for taking action to eradicate this form of tax evasion.
That is a classic example of self-regulation at work.
The most celebrated fraud case of 1967 involved the Ceylonese-born business man, Dr. Emil Savundra. He was arrested in February 1967 and charged with forgery as a result of activities through his company Fire, Auto and Marine Insurance Co. After a long trial, he was sent to

prison. That case caught the imagination of the then Chancellor of the Exchequer, the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan), who expressed concern about illegal currency transactions on the free currency markets and pledged measures to reduce them. A day later, in a debate in the House, Mr. Edward Lyons, the former Member for Bradford, East, said that large scale fraud could be "today's fastest-growing industry." That is not a swipe at the Opposition. I mention it simply to show that fraud has continued for decades.
In 1969, several stockbrokers were hammered for conspiracy to defraud. In Scotland, stockbrokers were suspended for the first time in the history of the Scottish stock exchange. In 1974, the Dowgate and General Investments fraud involved £5·2 million. The most sensational case in 1974 and 1975 involved a former Labour Minister, Mr. John Stonehouse. It was announced that year that the head of Scotland yard's fraud squad was to lead the investigation. A series of financial irregularities surfaced, and Mr. Stonehouse was convicted.
In 1975, there were many frauds involving employees of the National Westminster bank, Barclays bank, property companies and gold mining companies. Metropolitan police detectives were found guilty of conspiracy to defraud. Slater Walker is yet another name that features in the history of fraud in the City.
In 1976, as a result of anxiety about fraud and other difficulties in the City, the then Harold Wilson set up a committee to investigate the financial institutions. Later that year, the City of London police annual report said that detectives had handled frauds worth £150 million in 1977, compared with £90 million the year before. The strength of the fraud squad had to be increased by nearly one quarter. The Commissioner of Police for the City of London, Mr. Peter Marshall, said large-scale fraud was an ever-increasing commitment.
I put these examples forward merely to illustrate that whatever party is in power there will always be fraud in the City. I have no difficulty in supporting the Government's amendment.

Mr. Brian Gould: For good or ill, the City of London has dominated the news headlines for some months past and therefore it is appropriate to debate these matters today. Of all the issues that have been in the news, the most newsworthy has been fraud, although I agree with my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) that that is not necessarily the most important of the issues.
It was astonishing that the Chief Secretary's speech appeared to contain no recognition of the sense of outrage that so many ordinary people feel about the scale of City crime and about the greed of those responsible. They feel a sense of outrage not just on those very understandable grounds, but because of their accurate perception that those responsible for these massive crimes have largely escaped unpunished. The most remarkable feature of the past few years is that those substantial criminals against whom important charges could and should be brought have, in effect, escaped completely.
That is bad for public life in general and for the City's reputation, and it has earned for the City of London a reputation as the fraud capital of the world, which does us great damage. The failures that underlie that situation are partly a matter of a lack of commitment and resources


—something that the Government very belatedly and very parsimoniously are attempting to deal with. As my right hon. Friend the Member for Sparkbrook pointed out, there is a sharp and rather poignant contrast with the way in which City fraud is dealt with and the resources devoted to social security fraud. We have made that point before. Partly it is a matter of a simple failure of the regulatory authorities. No one would dispute — it has been conceded even by the Chancellor of the Exchequer — that the Johnson Matthey case was a blatant example of the Bank of England simply falling down on the job.
More worrying that any of these factors is the fact that these failures and frauds have arisen from the prevailing climate in the City. It is a fact that they have arisen as an incidental to the whole business of self-regulation. That is what must concern the House, and it is to that that we are rightly addressing ourselves.
If one were to take Lloyd's as the paradigm of the way in which self-regulation works, we can see that the problem is not just that there are a few criminals on the margins — wherever there are large sums of money sloshing around people will try to break the rules. That is not the explanation of what happened at Lloyd's. The offshore arrangements, the reinsurance deals, the preferred syndicates, the baby syndicates — all those instruments which become the vehicles for fraud—were embraced and taken on by those at the heart of the Lloyd's establishment, who were tainted by those practices. At Lloyd's, the regulators themselves became tarnished by the very practices that they should have been outlawing. It is from that basis that the House should approach the whole question of regulating the City.
In case anybody should argue, as is sometimes done, that these are matters of history, let me emphasis, as my right hon. Friend the Member for Sparkbrook did, that we are still living in a climate in which fraud is endemic and insider deals are reaching epidemic proportions. The practices that accompanied the flotation of British Telecom shares show how easily the City institutions were prepared to cross that line between their professional obligations and their personal deals.
These are the matters that concern us, and form the case for effective regulation. It was that case that led to the request to Professor Gower to produce his report, and to the Financial Services Bill. However, I am afraid that the Bill shows that the Government have not yet appreciated that the concern about fraud was, long before the Financial Services Bill appeared, overtaken by another massive development, the so-called big bang.
That magnifies our concern and makes it even more important that we should get things right. The development was initiated and given an impetus by a deal done by the right hon. Member for Hertsmere (Mr. Parkinson) when he was Secretary of State for Trade, and Sir Nicholas Goodison, which was clearly meant to forestall change. As soon as a glimmer of change appeared, a frenetic pace of activity was engendered.
We now see developing before us a City of London that is quite different from the institution at which Professor Gower looked. It will be dominated by huge, international financial conglomerates where the technological changes will make it extremely difficult to keep track of what is going on. As a result, far from the old institutional safeguards, inadequate though they were, remaining in place to deal with problems such as conflicts of interest in the City of today and tomorrow, conflicts of interest will

be there deliberately. They will be deliberately built in as part of the operation of the City of London. Sometimes, I suspect that even the City has not woken up to the new climate in which it will be operating.
All this makes it even more important that we get it right. The City will have to compete internationally—the blast of international competition will be fierce—and an important factor will be the level of investor protection that is offered. The other factors are speed, comprehensiveness, accuracy and price competitiveness. If we fail to meet the standards that are now taken for granted in most of the world's capital markets, we should not be surprised if business leaves London in large quantities. We have already seen, in the example of the collapse of the tin market, that when investors get their fingers burned, whatever the reasons, the knock-on damage is not just on the institution or market that is involved; it has consequences throughout the operation of the City of London. Let that be a warning.
I am afraid that, when the Government approached some of these problems when they introduced the Financial Services Bill, they did so in terms that showed that they were simply not willing to do what is needed, as has been said so often. The problem with that Bill is that when we asked the simple question, "Who is to regulate the City under its provisions?" there was no answer. This point was put extremely persuasively by the hon. Member for Chichester (Mr. Nelson). When we inquired further, we discovered that the body that is to undertake this vitally important role is the Securities and Investments Board Ltd., which is a private company. The fact that it is universally referred to as the Securities and Investments Board is Government propaganda, backed up by a provision in the Bill that will entitle that type of company to dispense with the word "limited" in its title. One can hardly have any more convincing argument about the Government's embarrassment over this than the fact that they have attempted to legislate specifically to conceal the fact that they are giving powers to a private company.
I am extremely disappointed—I make no bones about this, as it is well known to the Minister — by the Government's continuing opposition to putting in place a self-standing, independent and truly effective statutory body to undertake this task. In setting their face against that, Ministers are failing to go as far as even City opinion would now go. The City accepts, if not the desirability, the inevitability, of a statutory commission to undertake this major responsibility.
If the Government persist in their current attitude, the City should understand that it is the Government's intransigence that is condemning the City to a future of uncertainty and instability on this crucial issue. We would be obliged to legislate on that matter when we return to Government and we shall do that.
I would like to refer to another matter which has been in the headlines. That issue was raised extremely powerfully by the right hon. and learned Member for Hexham (Mr. Rippon). He referred to merger mama. I would like to add to the statistics that have been offered so far in the debate. The capital involved in takeover bids since the beginning of 1985—just over a year ago—approaches the £18 billion that we currently devote to the defence budget. That is a measure of the scale of what is happening.
Such a volume of mergers is an indictment of the Government's economic policy. It means that cash-rich


companies have nothing better to do with their money—certainly they do not want to invest in new productive capacity—than to go hunting for victims in the takeover market.
That development is extremely worrying on a number of counts. It creates that casino atmosphere that so disfigures the City. It is worrying because it diverts management attention essentially to protection and to short-term optimisation of performance and to all the short-term matters which have been the bane of British economic and industrial management for so long. It is also worrying because of the opportunities it provides for abuse.
We do not need to look far to see reports that in the frenetic atmosphere created by takeover bids, insider dealing has again emerged on a massive scale. This time, insider dealing has taken the precaution of operating through offshore companies and nominee shareholders.
I hope that the Minister will answer the following point when he replies. Is it true that when the stock exchange referred some of these matters to the DTI because it felt unable to deal with them effectively, it was told by the Department that it should not be bothered with such matters? That is what press reports have said and I hope that the Minister will take the opportunity to repudiate it.
An urgent reappraisal of that policy is needed now. There should not be a leisurely review which the Secretary of State for Trade and Industry is proposing to embark upon at some point. We need an urgent reappraisal so that we can return and restore some semblance of stability and sanity to the City. I give notice once more that, in the absence of any major changes in Government policy, a Labour Government would be compelled to legislate in that area to ensure that there was a proper inhibition upon ill-founded attempts simply to take over companies for less than obvious and good motives.
What is happening on the takeover front is part of a more general concern which my right hon. Friend the Member for Sparkbrook accurately referred to as the City's role as provider of finance to industry. I do not propose to labour that point but I would be astonished if anybody on the Government Benches could say that they were satisfied by the level and pattern of British investment at present. Any international comparison of merit or thoroughness will show that British investment lags behind. It is not so far-fetched as some Government spokesmen would have us believe to suggest that there may be a connection between our poor performance on the investment front and the means and institutions by which investment is provided as opposed to the means and institutions that apply in other and more successful countries.
The City's traditional defence to that complaint is that it is perfectly prepared to provide the money. It says that there is no shortage of money. The City claims that there is a shortage of adequate projects to which to lend money. If that were true, as it may be, what an indictment that is of Government economic policy. That indictment is lying in the mouths of some of the Government's best friends in the City of London. The Government have so managed the economy that no industrialist worth his salt could find projects worth investing in in the British economy. Presumably that is why that money is flooding abroad in such vast quantities.
Even on that issue, the City cannot escape the blame. The City is an obstacle to sensible macro-economic policy. It willingly embraced monetarism, and said, "Yes, monetarism is marvellous and accords with our political prejudices." The City, perhaps not unnaturally, found it extremely congenial to adopt a policy which said that economic salvation turned on one or two simple measures. It thought that that was a good idea, as those measures were entirely within its control. That is the extent to which, over the past seven years, the Government have abdicated the true control over macro-economic policy in this country.
The next Labour Government will give priority not to the City's interests but to the real economy —to the jobs, output and investment in our real economy. We cannot survive in an economy which is declining at the current rate. The City ought to recognise that it too cannot survive in such an economy as it cannot meet international competition from more powerful capital markets based on much more powerful economies.
The Opposition want to see the City prosper. We recognise that the City, like many other important parts of our economy, earns valuable foreign exchange and provides important areas of employment. Our quarrel in this debate is not essentially with the City. Our charge lies against the Government. The Government have allowed an unhealthy, not to say incestuous, relationship to develop between themselves and the City. The Government are too soft on fraud, and too weak-kneed to take effective regulatory action. They are too tolerant of the casino atmosphere which has developed and are too blind to the City's deficiencies as the provider of finance.
The Government are too subservient to the City's prejudices on economic policy. A Labour Government will insist on a different relationship with the City. We shall insist on a working relationship in which the City would be helped to succeed but in which it would also be required to play its full part as a servant of industry and an instrument of Government and meet its full obligations to the community as a whole.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Michael Howard): The debate has been largely about the City. The central point about the City, although one would be hard pressed to detect it from anything said by Opposition Members, is that the City is a success. It is one of the outstanding successes of our economy.
The Opposition constantly tell us how much they care about our national economy, foreign earnings and jobs. Measured by those criteria, the performance of the City is a matter not for the carping criticism of Opposition Members, but for congratulation.
My right hon. Friend the Chief Secretary to the Treasury quoted the figure for jobs in financial and business services. He said that 400,000 extra jobs have been created since 1974 and over 200,000 extra jobs since 1979. He gave the figure for total net earnings from abroad which amounted to more than £6 billion in 1984. Last year, the City raised more than £5 billion for industrial and commercial companies. That figure gives the lie to some of the more extravagant points made by the hon. Member for Dagenham (Mr. Gould) in his closing remarks.
A great deal of that success is due to the City's international competitiveness. More than one quarter of all


international bank lending is arranged in London. One fifth of the total insurance business available on international markets is carried out in London. London is the main world centre for Eurocurrency dealings and it, houses one third of the world's foreign exchange markets and an expanding international futures exchange. It is also the world centre for project finance, shipping and air freight brokerage and many commodity markets.
London attracts huge volumes of business which has no natural reason to come here. There is no law of nature which compels Australian owners to insure the risks that they incur in the United States of America with London insurers or which compels West German purchasers of Japanese shares to deal through London stock brokers or Dutch borrowers to raise Swiss currency through London bankers. That business is conducted in London because the City is efficient, competitive and convenient.
Yet one searches the Opposition's motion and the speeches made by Opposition Members in vain for any hint of recognition of that success. Why should that be so? Is it because the Opposition are so myopic that they do not recognise success when it stares them in the face? Or is it because they do not acknowledge success when they recognise it unless it fits into some Socialist stereotype and represents the world as they would like it to be rather than the world as it is?
The motion calls for an adequate system of regulation and supervision of the financial services sector. Of course that is necessary. That is why we have introduced the Financial Services Bill. We shall no doubt have another opportunity — I am conscious of the ruling that you made, Mr. Speaker, at the outset of our proceedings—to compare some of the things that the hon. Member for Dagenham said about regulation this afternoon and some of the things that he said about regulation in other proceedings.
The Financial Services Bill includes a number of measures which will help in the fight against fraud and malpractice generally. The requirement to be authorised will be extended to all types of investment business. If anyone carries out investment business without being authorised, he will be guilty of a criminal offence. There will be greater potential for the use of non-criminal sanctions where the standard of proof is less demanding and the scope for rapid action greater. There will be a wide range of such sanctions, running from injunctions and restitution orders to suspension and withdrawal of authorisation. Existing powers of investigation will he widened and compensation schemes funded by authorised businesses will protect customers and provide support for rigorous enforcement. The Bill is a comprehensive measure which will provide an effective system of regulation and supervision of the financial services of our economy.

Mr. Nelson: rose—

Mr. Howard: I am about to deal with some of the points raised by my hon. Friend the Member for Chichester (Mr. Nelson). Perhaps he will allow me to deal with them before I give way to him.
My hon. Friends the Members for Chichester and for Beaconsfield (Mr. Smith) have made cogent points today and in Standing Committee. They differ with me on where the balance should lie in the Bill with respect to the powers entrusted to the designated agency and the powers which

the Secretary of State is to retain. Those differences do not affect the powers which the Bill provides. They merely affect the repository of those powers. We have a genuine difference, but we share a common objective of getting the maximum possible investor protection.
As I have explained, I take the view that investor protection is increased if the designated agency is made accountable. I take the view that that leads to a more effective system. If the designated agency is made less accountable, as suggested by my hon. Friends the Members for Chichester and for Beaconsfield, it may have some advantages. I believe that the disadvantages outweigh those advantages. No doubt we shall continue to debate those issues as we have done in Standing Committee.

Mr. Campbell-Savours: Is the hon. and learned Gentleman aware of the great public concern about the fact that a private company, SIB plc, will be responsible for monitoring all the powers he has identified during his speech? Does he recognise that the wider public will never understand how it is possible for a private company to secure this police monitoring role of City institutions? Will he reconsider that point?

Mr. Howard: The public concern is for an effective system of investor protection. That is what we must provide. I have explained that, although some hen. Members—admittedly on both sides of the House—take one view as to the best means of achieving that objective, my view is that the best method is the one originally enshrined in the Bill.
The Bill is not the only measure on which we rely. My right hon. Friend the Chief Secretary referred to the Roskill committee and the important changes relating to fraud trials which it suggested. Taking into account the changes made in company law in the early years of this Government, the Insolvency Bill, which reached the statute book last year, the Financial Services Bill and the Roskill committee's recommendations, I believe that the Government have put forward the most comprehensive package of measures for dealing with fraud and malpractice that we shall probably ever see.
I should like to single out ore provision to which many hon. Members have referred — insider dealing. Undoubtedly, that is one of the most pernicious practices to blight financial markets. It is by no means unique to London. It is a particularly difficult practice to detect and to deal with. Clause 147 of the Financial Services Bill gives unprecedented powers to investigate allegations of insider dealing. Under that clause, inspectors will have the power to compel a person, on pain of contempt of court, to be examined on oath and to use in evidence against him any statement made by a person in such circumstances. Let no one underestimate the seriousness of this provision. It takes away the right of a person not to incriminate himself. It has rightly been described as draconian. We have been criticised for writing it into the Bill. If ever there were any doubt about the Government's seriousness in dealing with fraud and malpractice, I suggest that the most cursory examination of clause 147 of the Financial Services Bill will put such doubts to rest.
I respond directly to the point raised by the hon. Member for Dagenham. Of course it is not the case that my Department has said that it cannot be bothered with cases of insider dealing. The difficulty at the moment is


that the powers are not adequate to get the evidence necessary to satisfy a criminal burden of proof in the criminal courts for prosecution. We very much hope that the powers in clause 147 will enable more prosecutions to be brought for that offence.
Any innocent person coming to this subject afresh, reading the motion, and listening to Labour Members could be forgiven for concluding that the Labour party had a monopoly of concern about fraud, a monopoly on the desire for effective action to be taken against it. I always prefer to test the words of Labour Members by their deeds.
It is in that context that I should like to refer to the activities of the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore). A short time ago, the hon. Gentleman had an exchange of correspondence with the head of the fraud squad, an exchange of which the hon. Gentleman spoke openly to the press at the time. The head of the fraud squad asked the hon. Gentleman to consider carefully the consequences to the police inquiries of publicising evidence which he had passed to the police and proposes to pass to them.
The head of the fraud squad described these consequences. He said:
Suspects and evidence will disappear: potential witnesses will be identified and pestered by the press so that by the time they have been seen by the police they will have been scared off, or their evidence will be tainted by embellishments suggested by others.

Mr. Sedgemore: rose—

Mr. Howard: I shall give way in a moment.
The head of the fraud squad continued:
officers will be (and have been) diverted from high-priority enquiries which have not been publicised to low-priority enquiries which have simply to preserve evidence before it is destroyed or spoiled beyond redemption.
He also said:
I cannot understand how it can possibly be in the public interest for any such information to be disclosed contemporaneously to the world at large.

Mr. Sedgemore: Will the hon. and learned Gentleman accept that several months ago I made that correspondence public to the press and that, in fact, not only have I been helping the fraud squad since, but I am seeing a detective superintendent next Thursday to help them with their inquiries?

Mr. Howard: I am delighted to hear that. Let us see whether the hon. Gentleman's conduct has matched the warning which he was given by the head of fraud squad.

Mr. Campbell-Savours: Withdraw.

Mr. Howard: When the hon. Gentleman was given that warning, did he recognise, in his apparent desire to bring criminals to justice, the damage to that very cause which his activity was causing? Not a bit of it. He replied to the head of the fraud squad by criticising the fraud squad. That poses questions for Labour Front Benchers. Do they approve of the activities of the hon. Member for Hackney, South and Shoreditch? Do they approve of his refusal to comply with the request of the head of the fraud squad? Do they really want to see criminals brought to justice? Will they publicly disown the hon. Gentleman's activities? Will they persuade him to co-operate with the head of the fraud squad to ensure that those who have committed offences pay the penalty? [Interruption.] I

shall happily give way to the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) if he decides to put the record straight without further ado.

Mr. Hattersley: I was hoping that the Under-Secretary of State would make a sensible speech, but my hopes have been dashed.

Mr. Howard: That falls a long way short of answering the question. That is the right hon. Gentleman's response to the invitation I have extended to him. If the right hon. Gentleman is seeking to persuade the British people that the task of dealing with fraud is safer in his hands and in the hands of the hon. Member for Hackney, South and Shoreditch than in the hands of the head of the fraud squad, he has a fairly uphill task ahead of him.
The City is a success. The denigration to which it has been subjected by Opposition Members serves only to demonstrate their—

Mr. James Hamilton: rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the original words stand part of the Question:—

The House divided: Ayes 181, Noes 308.

Division No. 99]
[7.00 pm


AYES


Abse, Leo
Dobson, Frank


Adams, Allen (Paisley N)
Dormand, Jack


Anderson, Donald
Dubs, Alfred


Archer, Rt Hon Peter
Duffy, A. E. P.


Ashley, Rt Hon Jack
Dunwoody, Hon Mrs G.


Atkinson, N. (Tottenham)
Eastham, Ken


Bagier, Gordon A. T.
Edwards, Bob (W'h'mpt'n SE)


Banks, Tony (Newham NW)
Evans, John (St. Helens N)


Barnett, Guy
Ewing, Harry


Barron, Kevin
Fatchett, Derek


Beckett, Mrs Margaret
Faulds, Andrew


Bell, Stuart
Field, Frank (Birkenhead)


Bidwell, Sydney
Fields, T. (L'pool Broad Gn)


Blair, Anthony
Fisher, Mark


Boothroyd, Miss Betty
Flannery, Martin


Boyes, Roland
Foot, Rt Hon Michael


Brown, Gordon (D'f'mline E)
Forrester, John


Brown, Hugh D. (Provan)
Foster, Derek


Brown, N. (N'c'tle-u-Tyne E)
Foulkes, George


Brown, R. (N'c'tle-u-Tyne N)
Fraser, J. (Norwood)


Caborn, Richard
Freeson, Rt Hon Reginald


Campbell, Ian
Garrett, W. E.


Campbell-Savours, Dale
Godman, Dr Norman


Canavan, Dennis
Golding, John


Carter-Jones, Lewis
Gould, Bryan


Clark, Dr David (S Shields)
Gourlay, Harry


Clarke, Thomas
Hamilton, James (M'well N)


Clay, Robert
Hamilton, W. W. (Fife Central)


Clelland, David Gordon
Harman, Ms Harriet


Clwyd, Mrs Ann
Harrison, Rt Hon Walter


Cocks, Rt Hon M. (Bristol S)
Hart, Rt Hon Dame Judith


Cohen, Harry
Hattersley, Rt Hon Roy


Conlan, Bernard
Haynes, Frank


Cook, Robin F. (Livingston)
Healey, Rt Hon Denis


Corbett, Robin
Heffer, Eric S.


Corbyn, Jeremy
Hogg, N. (C'nauld &amp; Kilsyth)


Cox, Thomas (Tooting)
Holland, Stuart (Vauxhall)


Craigen, J. M.
Home Robertson, John


Crowther, Stan
Howell, Rt Hon D. (S'heath)


Cunliffe, Lawrence
Hoyle, Douglas


Cunningham, Dr John
Hughes, Robert (Aberdeen N)


Dalyell, Tam
Hughes, Sean (Knowsley S)


Davies, Rt Hon Denzil (L'lli)
Janner, Hon Greville


Davis, Terry (B'ham, H'ge H'l)
John, Brynmor


Deakins, Eric
Jones, Barry (Alyn &amp; Deeside)


Dewar, Donald
Kaufman, Rt Hon Gerald


Dixon, Donald
Kilroy-Silk, Robert






Kinnock, Rt Hon Neil
Roberts, Allan (Bootle)


Lamond, James
Robertson, George


Leadbitter, Ted
Robinson, G. (Coventry NW)


Leighton, Ronald
Rogers, Allan


Lewis, Terence (Worsley)
Rooker, J. W.


Litherland, Robert
Ross, Ernest (Dundee W)


Lloyd, Tony (Stretford)
Rowlands, Ted


Lofthouse, Geoffrey
Ryman, John


Loyden, Edward
Sedgemore, Brian


McCartney, Hugh
Sheerman, Barry


McDonald, Dr Oonagh
Sheldon, Rt Hon R.


McKay, Allen (Penistone)
Shore, Rt Hon Peter


McKelvey, William
Short, Ms Clare (Ladywood)


MacKenzie, Rt Hon Gregor
Short, Mrs R.(W'hampt'n NE)


McNamara, Kevin
Silkin, Rt Hon J.


McTaggart, Robert
Skinner, Dennis


Madden, Max
Smith, C.(Isl'ton S &amp; F'bury)


Mallon, Seamus
Smith, Rt Hon J. (M'ds E)


Marek, Dr John
Snape, Peter


Marshall, David (Shettleston)
Soley, Clive


Martin, Michael
Spearing, Nigel


Mason, Rt Hon Roy
Stewart, Rt Hon D. (W Isles)


Maxton, John
Stott, Roger


Maynard, Miss Joan
Strang, Gavin


Meacher, Michael
Straw, Jack


Michie, William
Thomas, Dafydd (Merioneth)


Mikardo, Ian
Thomas, Dr R. (Carmarthen)


Millan, Rt Hon Bruce
Thompson, J. (Wansbeck)


Miller, Dr M. S. (E Kilbride)
Thorne, Stan (Preston)


Mitchell, Austin (G't Grimsby)
Tinn, James


Morris, Rt Hon A. (W'shawe)
Torney, Tom


Morris, Rt Hon J. (Aberavon)
Wardell, Gareth (Gower)


Oakes, Rt Hon Gordon
Wareing, Robert


O'Brien, William
Weetch, Ken


O'Neill, Martin
Welsh, Michael


Orme, Rt Hon Stanley
White, James


Park, George
Wigley, Dafydd


Parry, Robert
Williams, Rt Hon A.


Pavitt, Laurie
Wilson, Gordon


Pendry, Tom
Winnick, David


Pike, Peter
Young, David (Bolton SE)


Prescott, John



Radice, Giles
Tellers for the Ayes:


Redmond, Martin
Mr. Ray Powell and


Rees, Rt Hon M. (Leeds S)
Mr. Ron Davies.


Richardson, Ms Jo





NOES


Adley, Robert
Brandon-Bravo, Martin


Aitken, Jonathan
Bright, Graham


Alton, David
Brinton, Tim


Ancram, Michael
Brittan, Rt Hon Leon


Arnold, Tom
Brooke, Hon Peter


Ashby, David
Brown, M. (Brigg &amp; Cl'thpes)


Ashdown, Paddy
Bruce, Malcolm


Aspinwall, Jack
Bruinvels, Peter


Atkins, Robert (South Ribble)
Bryan, Sir Paul


Atkinson, David (B'm'th E)
Buchanan-Smith, Rt Hon A.


Baker, Nicholas (Dorset N)
Buck, Sir Antony


Baldry, Tony
Budgen, Nick


Banks, Robert (Harrogate)
Butcher, John


Beaumont-Dark, Anthony
Butler, Rt Hon Sir Adam


Beith, A. J.
Butterfill, John


Bellingham, Henry
Carlile, Alexander (Montg'y)


Bendall, Vivian
Carlisle, John (Luton N)


Benyon, William
Carlisle, Kenneth (Lincoln)


Best, Keith
Carlisle, Rt Hon M. (W'ton S)


Bevan, David Gilroy
Carttiss, Michael


Biffen, Rt Hon John
Cartwright, John


Biggs-Davison, Sir John
Cash, William


Blaker, Rt Hon Sir Peter
Chalker, Mrs Lynda


Body, Sir Richard
Channon, Rt Hon Paul


Bonsor, Sir Nicholas
Chapman, Sydney


Boscawen, Hon Robert
Clark, Hon A. (Plym'th S'n)


Bottomley, Peter
Clark, Dr Michael (Rochford)


Bottomley, Mrs Virginia
Clark, Sir W. (Croydon S)


Bowden, A. (Brighton K'to'n)
Clarke, Rt Hon K. (Rushcliffe)


Bowden, Gerald (Dulwich)
Cockeram, Eric


Boyson, Dr Rhodes
Colvin, Michael


Braine, Rt Hon Sir Bernard
Conway, Derek





Coombs, Simon
Howell, Rt Hon D. (G'ldford)


Cope, John
Howell, Ralph (Norfolk, N)


Cormack, Patrick
Howells, Geraint


Corrie, John
Hubbard-Miles, Peter


Couchman, James
Hughes, Simon (Southwark)


Critchley, Julian
Hunt, David (Wirral W)


Crouch, David
Hunt, John (Ravensbourne)


Currie, Mrs Edwina
Hunter, Andrew


Dickens, Geoffrey
Irving, Charles


Dicks, Terry
Jackson, Robert


Dorrell, Stephen
Jenkins, Rt Hon Roy (Hillh'd)


Douglas-Hamilton, Lord J.
Jessel, Toby


Dover, Den
Johnston, Sir Russell


du Cann, Rt Hon Sir Edward
Jones, Gwilym (Cardiff N)


Dunn, Robert
Jones, Robert (Herts W)


Dykes, Hugh
Jopling, Rt Hon Michael


Eggar, Tim
Joseph, Rt Hon Sir Keith


Emery, Sir Peter
Kellett-Bowman, Mrs Elaine


Evennett, David
Kennedy, Charles


Eyre, Sir Reginald
Kershaw, Sir Anthony


Fairbairn, Nicholas
Key, Robert


Fallon, Michael
King, Roger (B'ham N'field)


Farr, Sir John
Kirkwood, Archy


Favell, Anthony
Knight, Greg (Derby N)


Fletcher, Alexander
Knowles, Michael


Fookes, Miss Janet
Knox, David


Forman, Nigel
Lamont, Norman


Forsyth, Michael (Stirling)
Lang, Ian


Fowler, Rt Hon Norman
Latham, Michael


Fox, Marcus
Lawrence, Ivan


Franks, Cecil
Lawson, Rt Hon Nigel


Fraser, Peter (Angus East)
Leigh, Edward (Gainsbor'gh)


Freeman, Roger
Lennox-Boyd, Hon Mark


Freud, Clement
Lester, Jim


Fry, Peter
Lightbown, David


Gale, Roger
Lilley, Peter


Galley, Roy
Lloyd, Ian (Havant)


Gardiner, George (Reigate)
Lloyd, Peter (Fareham)


Gardner, Sir Edward (Fylde)
Lord, Michael


Garel-Jones, Tristan
McCrindle, Robert


Gilmour, Rt Hon Sir Ian
MacGregor, Rt Hon John


Glyn, Dr Alan
MacKay, John (Argyll &amp; Bute)


Goodhart, Sir Philip
Maclean, David John


Goodlad, Alastair
Major, John


Gorst, John
Malone, Gerald


Gow, Ian
Maples, John


Gower, Sir Raymond
Marland, Paul


Greenway, Harry
Mather, Carol


Griffiths, Sir Eldon
Maude, Hon Francis


Griffiths, Peter (Portsm'th N)
Maxwell-Hyslop, Robin


Grist, Ian
Meadowcroft, Michael


Ground, Patrick
Merchant, Piers


Grylls, Michael
Meyer, Sir Anthony


Gummer, Rt Hon John S
Miller, Hal (B'grove)


Hamilton, Hon A. (Epsom)
Mills, Sir Peter (West Devon)


Hamilton, Neil (Tatton)
Miscampbell, Norman


Hampson, Dr Keith
Moate, Roger


Hanley, Jeremy
Morris, M. (N'hampton S)


Hargreaves, Kenneth
Nelson, Anthony


Harris, David
Neubert, Michael


Harvey, Robert
Newton, Tony


Haselhurst, Alan
Nicholls, Patrick


Hawkins, C. (High Peak)
Norris, Steven


Hawksley, Warren
Onslow, Cranley


Hayes, J.
Ottaway, Richard


Hayhoe, Rt Hon Barney
Owen, Rt Hon Dr David


Hayward, Robert
Page, Richard (Herts SW)


Heathcoat-Amory, David
Parkinson, Rt Hon Cecil


Heddle, John
Parris, Matthew


Henderson, Barry
Pawsey, James


Hickmet, Richard
Penhaligon, David


Hicks, Robert
Powell, William (Corby)


Higgins, Rt Hon Terence L.
Powley, John


Hirst, Michael
Pym, Rt Hon Francis


Hogg, Hon Douglas (Gr'th'm)
Raison, Rt Hon Timothy


Holland, Sir Philip (Gedling)
Rees, Rt Hon Peter (Dover)


Holt, Richard
Rhys Williams, Sir Brandon


Hordern, Sir Peter
Ridsdale, Sir Julian


Howard, Michael
Rippon, Rt Hon Geoffrey


Howarth, Alan (Stratf'd-on-A)
Roberts, Wyn (Conwy)






Robinson, Mark (N'port W)
Thomas, Rt Hon Peter


Ross, Stephen (Isle of Wight)
Thompson, Patrick (N'ich N)


Rossi, Sir Hugh
Thornton, Malcolm


Rost, Peter
Thurnham, Peter


Rumbold, Mrs Angela
Townend, John (Bridlington)


Ryder, Richard
Townsend, Cyril D. (B'heath)


Sackville, Hon Thomas
Trippier, David


Sainsbury, Hon Timothy
Trotter, Neville


Sayeed, Jonathan
Twinn, Dr Ian


Shaw, Giles (Pudsey)
van Straubenzee, Sir W.


Shaw, Sir Michael (Scarb')
Vaughan, Sir Gerard


Shepherd, Colin (Hereford)
Waddington, David


Shepherd, Richard (Aldridge)
Wainwright, R.


Shersby, Michael
Wakeham, Rt Hon John


Silvester, Fred
Waldegrave, Hon William


Sims, Roger
Walden, George


Skeet, Sir Trevor
Walker, Bill (T'side N)


Smith, Cyril (Rochdale)
Walker, Rt Hon P. (W'cester)


Smith, Sir Dudley (Warwick)
Wall, Sir Patrick


Smith, Tim (Beaconsfield)
Wallace, James


Soames, Hon Nicholas
Waller, Gary


Speller, Tony
Ward, John


Spencer, Derek
Wardle, C. (Bexhill)


Spicer, Jim (Dorset W)
Warren, Kenneth


Spicer, Michael (S Worcs)
Watson, John


Squire, Robin
Watts, John


Stanbrook, Ivor
Wells, Bowen (Hertford)


Stanley, Rt Hon John
Wells, Sir John (Maidstone)


Steel, Rt Hon David
Wheeler, John


Steen, Anthony
Whitney, Raymond


Stern, Michael
Wiggin, Jerry


Stevens, Lewis (Nuneaton)
Wilkinson, John


Stewart, Allan (Eastwood)
Winterton, Mrs Ann


Stewart, Andrew (Sherwood)
Winterton, Nicholas


Stewart, Ian (Hertf'dshire N)
Wolfson, Mark


Stokes, John
Wood, Timothy


Stradling Thomas, Sir John
Woodcock, Michael


Sumberg, David
Wrigglesworth, Ian


Tapsell, Sir Peter
Yeo, Tim


Taylor, John (Solihull)
Young, Sir George (Acton)


Taylor, Teddy (S'end E)



Tebbit, Rt Hon Norman
Tellers for the Noes:


Temple-Morris, Peter
Mr. Tony Durant and


Terlezki, Stefan
Mr. Donald Thompson.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 33 (Questions on amendments):—

The House divided: Ayes 243, Noes 34.

Division No. 100]
[7.13 pm


AYES


Adley, Robert
Braine, Rt Hon Sir Bernard


Aitken, Jonathan
Brandon-Bravo, Martin


Ancram, Michael
Bright, Graham


Arnold, Tom
Brinton, Tim


Ashby, David
Brittan, Rt Hon Leon


Aspinwall, Jack
Brooke, Hon Peter


Atkins, Robert (South Ribble)
Brown, M. (Brigg &amp; Cl'thpes)


Atkinson, David (B'm'th E)
Bryan, Sir Paul


Baker, Nicholas (Dorset N)
Buchanan-Smith, Rt Hon A.


Baldry, Tony
Buck, Sir Antony


Beaumont-Dark, Anthony
Budgen, Nick


Bellingham, Henry
Butcher, John


Bendall, Vivian
Butler, Rt Hon Sir Adam


Benyon, William
Butterfill, John


Best, Keith
Carlisle, John (Luton N)


Bevan, David Gilroy
Carttiss, Michael


Biffen, Rt Hon John
Cash, William


Blaker, Rt Hon Sir Peter
Chalker, Mrs Lynda


Body, Sir Richard
Channon, Rt Hon Paul


Boscawen, Hon Robert
Chapman, Sydney


Bottomley, Peter
Clark, Dr Michael (Rochford)


Bottomley, Mrs Virginia
Clarke, Rt Hon K. (Rushcliffe)


Bowden, A. (Brighton K'to'n)
Cockeram, Eric


Bowden, Gerald (Dulwich)
Coombs, Simon


Boyson, Dr Rhodes
Cope, John





Cormack, Patrick
King, Roger (B'ham N'field)


Corrie, John
Knight, Greg (Derby N)


Couchman, James
Knowles, Michael


Crouch, David
Knox, David


Currie, Mrs Edwina
Lamont, Norman


Dicks, Terry
Lang, Ian


Dorrell, Stephen
Latham, Michael


Douglas-Hamilton, Lord J.
Lawrence, Ivan


du Cann, Rt Hon Sir Edward
Lawson, Rt Hon Nigel


Dunn, Robert
Lennox-Boyd, Hon Mark


Dykes, Hugh
Lightbown, David


Emery, Sir Peter
Lloyd, Ian (Havant)


Evennett, David
Lloyd, Peter (Fareham)


Eyre, Sir Reginald
Lord, Michael


Fairbairn, Nicholas
McCrindle, Robert


Favell, Anthony
MacGregor, Rt Hon John


Fletcher, Alexander
MacKay, John (Argyll &amp; Bute)


Fookes, Miss Janet
Maclean, David John


Forman, Nigel
Major, John


Forsyth, Michael (Stirling)
Maples, John


Fowler, Rt Hon Norman
Marland, Paul


Fox, Marcus
Mather, Carol


Franks, Cecil
Maude, Hon Francis


Fraser, Peter (Angus East)
Maxwell-Hyslop, Robin


Freeman, Roger
Merchant, Piers


Fry, Peter
Meyer, Sir Anthony


Gale, Roger
Miller, Hal (B'grove)


Galley, Roy
Miscampbell, Norman


Gardiner, George (Reigate)
Moate, Roger


Gardner, Sir Edward (Fylde)
Morris, M. (N'hampton S)


Garel-Jones, Tristan
Nelson, Anthony


Glyn, Dr Alan
Newton, Tony


Goodhart, Sir Philip
Nicholls, Patrick


Goodlad, Alastair
Norris, Steven


Gorst, John
Ottaway, Richard


Gower, Sir Raymond
Page, Richard (Herts SW)


Greenway, Harry
Parkinson, Rt Hon Cecil


Griffiths, Sir Eldon
Pawsey, James


Griffiths, Peter (Portsm'th N)
Portillo, Michael


Grist, Ian
Powell, William (Corby)


Ground, Patrick
Powley, John


Grylls, Michael
Pym, Rt Hon Francis


Gummer, Rt Hon John S
Raison, Rt Hon Timothy


Hamilton, Hon A. (Epsom)
Rees, Rt Hon Peter (Dover)


Hamilton, Neil (Tatton)
Rhys Williams, Sir Brandon


Hargreaves, Kenneth
Ridsdale, Sir Julian


Harris, David
Rippon, Rt Hon Geoffrey


Harvey, Robert
Roberts, Wyn (Conwy)


Haselhurst, Alan
Robinson, Mark (N'port W)


Hawkins, C. (High Peak)
Rumbold, Mrs Angela


Hawksley, Warren
Ryder, Richard


Hayes, J.
Sackville, Hon Thomas


Hayhoe, Rt Hon Barney
Sainsbury, Hon Timothy


Hayward, Robert
Sayeed, Jonathan


Heathcoat-Amory, David
Shaw, Giles (Pudsey)


Heddle, John
Shaw, Sir Michael (Scarb')


Henderson, Barry
Shepherd, Colin (Hereford)


Hickmet, Richard
Shepherd, Richard (Aldridge)


Hicks, Robert
Shersby, Michael


Higgins, Rt Hon Terence L.
Silvester, Fred


Hirst, Michael
Sims, Roger


Hogg, Hon Douglas (Gr'th'm)
Skeet, Sir Trevor


Holland, Sir Philip (Gedling)
Smith, Sir Dudley (Warwick)


Holt, Richard
Soames, Hon Nicholas


Howard, Michael
Speller, Tony


Howarth, Alan (Stratf'd-on-A)
Spencer, Derek


Howell, Ralph (Norfolk, N)
Spicer, Jim (Dorset W)


Hubbard-Miles, Peter
Spicer, Michael (S Worcs)


Hunt, David (Wirral W)
Stanbrook, Ivor


Hunt, John (Ravensbourne)
Steen, Anthony


Irving, Charles
Stern, Michael


Jackson, Robert
Stevens, Lewis (Nuneaton)


Jessel, Toby
Stewart, Allan (Eastwood)


Jones, Gwilym (Cardiff N)
Stewart, Andrew (Sherwood)


Jones, Robert (Herts W)
Stokes, John


Jopling, Rt Hon Michael
Stradling Thomas, Sir John


Joseph, Rt Hon Sir Keith
Tapsell, Sir Peter


Kellett-Bowman, Mrs Elaine
Taylor, John (Solihull)


Kershaw, Sir Anthony
Taylor, Teddy (S'end E)


Key, Robert
Tebbit, Rt Hon Norman





Temple-Morris, Peter
Ward, John


Terlezki, Stefan
Wardle, C. (Bexhill)


Thomas, Rt Hon Peter
Warren, Kenneth


Thompson, Donald (Calder V)
Watson, John


Thompson, Patrick (N'ich N)
Wells, Sir John (Maidstone)


Thornton, Malcolm
Wheeler, John


Thurnham, Peter
Whitney, Raymond


Townsend, Cyril D. (B'heath)
Wiggin, Jerry


Trippier, David
Wilkinson, John


Trotter, Neville
Winterton, Mrs Ann


van Straubenzee, Sir W.
Winterton, Nicholas


Vaughan, Sir Gerard
Wolfson, Mark


Waddington, David
Wood, Timothy


Wakeham, Rt Hon John
Yeo, Tim


Waldegrave, Hon William



Walden, George
Tellers for the Ayes:


Walker, Bill (T'side N)
Mr. Tony Durant and


Walker, Rt Hon P. (W'cester)
Mr. Gerald Malone.


Waller, Gary





NOES


Alton, David
Marshall, David (Shettleston)


Ashdown, Paddy
Meadowcroft, Michael


Beith, A. J.
Michie, William


Bruce, Malcolm
Millan, Rt Hon Bruce


Campbell-Savours, Dale
Owen, Rt Hon Dr David


Carlile, Alexander (Montg'y)
Penhaligon, David


Clay, Robert
Ross, Stephen (Isle of Wight)


Deakins, Eric
Skinner, Dennis


Freud, Clement
Smith, Cyril (Rochdale)


Heffer, Eric S.
Steel, Rt Hon David


Howells, Geraint
Thomas, Dafydd (Merioneth)


Hughes, Simon (Southwark)
Thorne, Stan (Preston)


Jenkins, Rt Hon Roy (Hillh'd)
Wainwright, R.


Johnston, Sir Russell
Wilson, Gordon


Kennedy, Charles
Wrigglesworth, Ian


Kirkwood, Archy



Loyden, Edward
Tellers for the Noes:


Maclennan, Robert
Mr. John Cartwright and


Madden, Max
Mr. James Wallace.

Question accordingly agreed to.

MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved,
That this House recognises the continuing and increasing contribution being made by the financial services industry in the United Kingdom to wealth creation and employment; and welcomes the Government's measures to remove obstacles to the efficient operation of the market in financial services, to improve the regulatory framework in the whole financial services sector and to deter and punish fraud.

Student Support

Mr. Giles Radice: I beg to move,
That this House deplores the Government's announcement of only a two per cent. increase for next year in the student grant, which is a further cut in real terms in addition to the 17 per cent. reduction in value since 1979; and condemns the Government's policies of restricting the access of students to the social security system whilst failing to make up the losses, which will be severe for students who have no other form of income.
The Government's record on student grants is widely recognised to be deplorable. Since 1979 it has steadily and consistently eroded the student grant system, which was, I would remind the House, established by a Conservative Government in 1962 and supported and developed by subsequent Conservative and Labour Governments. Hon. Members are only too familiar with what has happened. By next year the real value of the student grant will have fallen by about 20 per cent. The level of the parental contribution has increased sharply. In addition, students have lost their right to be reimbursed for their travel costs—and I see that the hon. Member for Canterbury (Mr. Crouch) is in his place.

Mrs. Elaine Kellett-Bowman: That is very cryptic.

Mr. Radice: It is not cryptic, because Canterbury university is in the hon. Member's constituency and I know that there have been many protests from the students of that university about their travel costs.
One of the most depressing features of the Government's policies is that, as local education authority spending has been squeezed, the number and value of the so-called discretionary grants provided by local councils have also fallen significantly.
On top of all this, the Government announced in their White Paper "Reform of Social Security" that they propose to amend the existing regulations on entitlement to supplementary benefit and housing benefit for students, to remove all full-time students' entitlement to supplementary benefit and unemployment benefit in the short vacations, to remove entitlement to housing benefit for students in halls of residence, and to modify and reduce entitlement to housing benefit in all vacations. These proposals, it was said, were seen as a first step towards removing students from entitlement to social security as a whole.
It is true — I fully accept this — that some compensation for the loss of benefit is to be introduced. Students living away from home will receive £36 a year.
My hon. Friend the Member for Derby, South (Mrs. Beckett) will be dealing in more detail with what the Government are proposing. I merely draw attention to the Prime Minister's reply to my hon. Friend the Member for Denton and Reddish (Mr. Bennett), when she made it clear that at least half the students are likely to face a loss of income. The National Union of Students believes it would be even worse.
No wonder that the Committee of Vice-Chancellors and Principals has said that the system of student financial support is now in an advanced state of decay. No wonder that the rector of Glasgow University, the vice-chancellor of East Anglia and the vice-chancellor of Durham have all separately warned about the consequences of Government policies. The vice-chancellor of Durham has told parents


that financial difficulties are now driving some students out of higher education, while the vice-chancellor of East Anglia and the rector of Glasgow have both said that financial hardship is having an adverse effect on some students' academic performance. I am merely quoting what vice-chancellors have said, and I should have thought that Government Members would also take some account of this.
It is no wonder that, shortly before Christmas, the hon. Member for Cambridge (Mr. Rhodes James)—the hon. Gentleman has courteously informed me that, although he is not able to be present for the beginning of the debate, he will be present later—resigned as the Government's higher education officer. He told the Prime Minister when he resigned:
the squeeze on university finances has now become intolerable, and the last straw was the decision to give a 2 per cent. increase in student grants coupled with removing all benefits.
He added:
Students have suffered cuts in real terms of something like 19 per cent. since the Tories came to office.
He continued:
I have always seen it as my job to encourage young people to go into higher education and I fear that what the Government has done, and is doing, is in absolutely the opposite direction.
That is what the hon. Gentleman told the Prime Minister, and all credit to him for his courage in saying openly what many Conservative Members are saying in private.
I agree with the hon. Member for Cambridge that the Government are moving in the wrong direction. However, at times it has been difficult to discern exactly what the Government's policy is on student financial support. The House will remember that, at the end of 1984, the Secretary of State found himself in rather a mess with Conservative Back Benchers over his plan to make tuition fees liable to parental contribution. In announcing his climbdown to the House, he spoke of his intention to review the system. He said specifically that the review would include an examination of the feasibility of replacing student grants with student loans.
We were told by the press during the summer of 1985 that the Cabinet had vetoed the Secretary of State's pet proposal that the review should recommend the introduction of student loans. If those reports were not accurate, I have no doubt that the right hon. Gentleman will tell us when he speaks. After that, the right hon. Gentleman was clearly at a loss to know what to say. After months of prevarication he announced that the promised review would not be published and that he would not be bringing forward proposals for reforming the grant system. After all that, the right hon. Gentleman is left with a policy of cut, cut and cut again.
The Secretary of State told me in January—this was in justification of his position—that he thought it right that students should share with other responsible adults some of the burden of holding down public expenditure, thus helping to regenerate our economy to the ultimate benefit of everyone, including students and their families. In other words, students should have to pay for the failure of the Government's economic policy.

The Parliamentary Under-Secretary of State for Education and Science (Mr. George Walden): No, its success.

Mr. Radice: The Under-Secretary of State with responsibility for higher education says that he wants students to contribute towards the success of that policy. I rather doubt whether cutting student grants will help to do that.
In a gloss on the same argument the hon. Gentleman, whom I welcome to the debate, has argued that the student body should have to help pay for the increased numbers of students in higher education. That is an odd argument. Why should existing students have to pay directly for an increase in the student population, which should be to the advantage of the entire community? What is the Secretary of State's strategy on grants? I know that many Conservative Back Benchers would like to ask him that question. Does he propose to continue cutting their real value?

Mr. Roland Boyes: Of course he does.

Mr. Radice: If so, perhaps he will tell the House that that is his intention. Alternatively, does he intend to rely on a de facto loan system continuing through the banks? After all the heavy weekend briefings that we have had on vouchers and all the other pet items on the agenda of the reactionary tendency—I see that a representative of that tendency, the hon. Member for Rugby and Kenilworth (Mr. Pawsey), is in his place — is the right hon. Gentleman proposing that loans should feature on the agenda?

Mr. Ken Weetch: Does my hon. Friend realise that, throughout the country, students are getting in serious debt because the banks, in an irresponsible way, allow students to run up quite large overdrafts? Does he know that I have been involved in cases where banks have allowed students' overdrafts to run up to £5,000 or £6,000? Is this not a back-door way of forcing through a loans policy?

Mr. Radice: My hon. Friend has outlined clearly what is happening. It would be useful if he sent some examples to the Secretary of State, or perhaps to the Under-Secretary of State, so that the latter can find out for himself what is really happening in higher education. I often doubt whether either Minister knows. The Secretary of State should tell the House what the Government intend to do to remedy the highly unsatisfactory state of student financial support.
The Labour party rejects the Government's policy. Even the Daily Mail has described it as "shabby". We believe that students deserve better for themselves and for the sake of the nation. As a community, we need a sustained and increasing supply of skilled, adaptable and creative graduates. The community should have responsibility for supporting them adequately. As the National Advisory Body for Public Sector Higher Education has said—

Mr. Martin Brandon-Bravo: rose—

Mr. Radice: No, I shall not give way for the moment.
The national advisory body has said that the system of student financial support is central to the debate on the future demand for higher education places. The decision whether to enter or to continue in higher education depends in part on access policies, and I hope that we shall be debating those policies in future. The decision depends


also on the level and availability of financial support. The 17 per cent. decline—it will almost certainly be 20 per cent. by the end of the coming year—in the value of student grants since 1979 is causing many students hardship and may well have discouraged qualified young people from going into higher education.
As evidence of that, I quote a written answer of 10 March in which the Under-Secretary of State with responsibility for higher education stated that the proportion of qualified young people—those with two A-levels—entering higher education had declined since 1981. I refer to the qualified participation rate.

Mr. Walden: indicated dissent.

Mr. Radice: Unfortunately, that is the fact. Therefore, the Labour party proposes that the value of the student grant should be increased. We also believe that mandatory grants should be extended and that assistance should be provided for part-time students, who are very important for the nation's future.

Mr. Brandon-Bravo: I hope the hon. Gentleman will quantify his remarks. He will recall that yesterday there was an altercation in the House about the famous list of Labour spending of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). The right hon. Gentleman said at the Dispatch Box that the list was false and that only two items were true. He named them, and they did not include additional provision for students.

Mr. Radice: I am not sure whether the hon. Member for Nottingham, South (Mr. Brandon-Bravo) was listening yesterday when I said that the Chief Secretary had multiplied by five the amount we proposed to spend on schools. Of course everyone would like to be able to spend five times as much on improving the quality of education, but we are a responsible Opposition and we were not putting forward irresponsible proposals. Unfortunately, the Chief Secretary totally misled the House and some of my hon. Friends about what would happen in their areas. That is deplorable. I am surprised that the hon. Member for Nottingham, South should have made such an intervention.
We shall also introduce a system of maintenance allowances for those who are in full-time education after 16. If we want more young people to go into higher education, we must encourage them to stay on after 16. As a nation we have a very low ratio of those staying at school. That is one reason why we need maintenance grants.

Mr. Patrick Thompson: rose—

Mr. Radice: I am not giving way, because I am coming to the end of my speech.
Maintenance grants would be an investment in our young people and adults who want to take part in higher and continuing education. It would be an investment worth making and the benefits would easily outweigh the cost of not having a skilled and competent population. We reject the Government's short-sighted, wrong-headed policies on students, just as we reject their cuts in higher education as a whole.
I invite Conservative Members who have been so clear in private about their opposition to what the Government have done about student financial support, and who write

letters to the National Union of Students to point out that they are on the side of the students, to join us in the Lobby to vote for the motion.

The Secretary of State for Education and Science (Sir Keith Joseph): I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
recognises that more students than ever before are receiving higher education; appreciates he need to hold increases in student grant rates to levels which the country can afford; welcomes the Government's current efforts to rationalise and simplify some aspects of the provisions of the social security system as it effects students; and notes that the Secretary of State for Social Services expects shortly to receive the advice of the Social Security Advisory Committee on his proposals to this end.".
The Government wish to listen carefully to the debate, and I have listened carefully to the speech of the hon. Member for Durham, North (Mr. Radice). We accept that there is anxiety in the student population and no doubt among their families about what the Government's proposals may mean. I emphasise straight away that the Government's decision to remove students from the social security system will be implemented over the medium to long term. As a first step to disentitle students from certain identified social security and related benefits the Government intend that a sensible rationalisation should take place in the near future.
Because the Government recognise that the alterations may influence student intentions and student lives, we embarked upon consultation, which has recently come to an end. We hope in the next few weeks to receive the report from the Social Security Advisory Committee. I assure the House that the Government will study the report carefully and sympathetically. The House cannot expect that in anticipation of the report the Government will announce this evening what should be done to achieve the sensible rationalisation steps that we propose.
We expect to learn from the advisory committee that some students will not be affected by the proposed short-term changes and that some will be slightly affected. We expect that some students might, unless suitable arrangements are made, be more severely affected. Until we get the report, we cannot identify the scale and the impact of the proposals that we have in mind, nor can we decide on the optimum compensation arrangements.

Mr. David Crouch: My right hon. Friend has referred to a study which will reveal the implications for students. Will he also consider the implication that that might reveal, that some potential students will not become students because they feel that their parents could not afford it? I put the point seriously, having talked to many students about that possibility.

Mr. Patrick Cormack: Will my right hon. Friend take a second point before he replies?

Mr. Deputy Speaker (Sir Paul Dean): Order. We cannot have two interventions on the trot.

Sir K. Joseph: The answer to the question put by my hon. Friend the Member for Canterbury (Mr. Crouch) is yes. We shall certainly consider whether there is any reason to expect that possible changes would discourage potential students from going forward, although my hon. Friend will realise that we are in the realm of conjecture. Often allegations are made but it is hard to establish


evidence. I shall come later to the nearest to evidence that we have, namely the age participation index, which is so far very encouraging.

Mr. Cormack: My point follows on from what my hon. Friend the Member for Canterbury (Mr. Crouch) said. Will my right hon. Friend bear in mind that parents are exceptionally concerned? Will he reaffirm that it is the policy of the Government, as he told the Select Committee in the last Parliament that it was, that over a period they will phase out the parental contribution, bearing in mind that young people become adults at the age of 18? He told the Select Committee some years ago that that was the Government's long-term policy. Does it remain so?

Sir Keith Joseph: I am sure that my hon. Friend is quoting me accurately, but I am slightly nervous to think that I used the mode of a future definite in what I said to the Select Committee. No doubt any Government would want to phase out the parental contribution, but I doubt whether I actually said that the Government will phase it out. Alas, I do not see that as an immediate prospect for any Government. That we should like to do so I can confirm.
Into the sympathetic reception with which the Government wish to greet the expression of anxiety by hon. Members on both sides of the House, I must insert a couple of realistic points that need to be borne in mind. It has been the policy of all Governments in recent years to consider that students should look to a combination of sources from which to draw their income. For example, they should look to student awards and to their parents. That has been the common policy of both Labour and Conservative Governments. They should also look, although to a lesser extent in many parts of the country than a few years ago, to occasional part-time earnings. Moreover, they should look to some extent to the savings that they may have put aside, and even to loans individually contracted with their families or banks.
The hon. Member for Ipswich (Mr. Weetch) intervened with a story about an overdraft of thousands of pounds being run up. If it will not breach confidence to do so, I hope that he will send the information to my hon. Friend the Under-Secretary of State or to me.

Mr. Weetch: Perhaps I should tell the Secretary of State that I have already written to his Department and have had a reply from one of the Ministers, who said that the problem would be borne in mind. I hope that that is indeed so.

Sir Keith Joseph: I shall make it my business to look at the case so that I can bear it in mind. However, it seems a little imprudent to run up such an overdraft unless there are exceptional circumstances.

Mr. Michael Shersby: Will my right hon. Friend give way?

Sir Keith Joseph: Yes, but I must limit the number of times that I do so.

Mr. Shersby: In talking about the various ways in which students can be supported at university, will my right hon. Friend say something about the possibilities of encouraging industrial sponsorship? Will he recognise the

problems experienced by students at sandwich universities, such as Brunel in my constituency, as the cost of accommodation in west London is very high?

Sir Keith Joseph: I am cursing myself for omitting business sponsorship from the list of sources to which students can turn. I am grateful to my hon. Friend for reminding me of it, as I should have included it.
Thus, there are various sources which, in combination, Governments have considered as potential providers of revenue. But I say, on behalf of the Government, that we certainly do not want to defeat the legitimate expectations of students entering higher education to a degree that would alter their intention. That is not what we want. Consequently, we shall study the consultation report very carefully. Obviously, the Government do not for a moment wish to discourage students from poorer households. In response to the hon. Member for Durham, North, I should say that we do not want to discourage the admission of those who are qualified for higher education.
We take particular pride in the fact that there is a record percentage of a record age cohort in higher education now. There are nearly 80,000 more students in higher education than in 1979. There are slightly fewer students in universities, but many more in the polytechnics and colleges. The degree to which the number of students from polytechnics and colleges has risen is shown by the net increase in higher education. The figure in total is nearly 80,000 more, which is over 15 per cent. more than the number in 1979. That is a record number and a record proportion of a record age cohort.
I say gently to the hon. Member for Durham, North that there were fewer students in higher education in 1979 than in 1975. Before he adopts too sanctimonious a tone, he should recognise that fact. Indeed, the qualified age participation index—the proportion of those who are qualified for admission to higher education—is better now than in 1979, when the Labour Government left office.

Mr. Andrew F. Bennett: Will the Secretary of State accept that he has got the figures wrong? Between 1979 and this year the qualified participation rate has fallen. But the more worrying factor is that in the early 1970s there was a qualified participation rate of about 97 per cent. The figure is now down to 81 or 83 per cent. Is there not a clear correlation between the way in which grants fell during that 15-year period and the proportion of people with qualifications going into higher education?

Sir Keith Joseph: This is rather technical stuff—[Laughter.] Before Opposition Members crow too much, I should add that the technicalities are against them. It is true that in the early 1970s the age participation index was 0·1 per cent. higher than it is now. But that was because at that time it included people going on to teacher training with only one A level. Therefore, on a comparative basis, the age participation index is at a higher level than in 1979. I think that the hon. Gentleman must be working on a quite different definition when he talks about 97 per cent.

Dr. Alan Glyn: My right hon. friend rightly said that no one from a poor background should be prevented from embarking on further education. Does he agree that those who are


qualified and whose parents refuse to pay are automatically disqualified from any form of higher education?

Sir Keith Joseph: I must accept that in such circumstances that is so, unless the potential student can find other resources. But I very much doubt whether there are many such examples. The latest survey to be given to us shows that those parents who fail to pay are, on average, failing to pay only a small fraction of the sum ideally due from them.
Students in this country receive all their tuition fees from the taxpayer and ratepayer. Those tuition fees vary from about £3,000 a year for a humanities course, which normally runs for three years and thus totals about £9,000 in subsidies from the taxpayer, to perhaps about £7,000 or £8,000 a year for a medical or veterinary course, which lasts for perhaps five or six years. I am not quarrelling with those figures but merely reminding the House of them. So in the case of veterinary or medical courses, the subsidies from the taxpayer and ratepayer are very large, amounting to about £40,000 for the course.

Mr. Mark Fisher: A very sensible investment.

Sir Keith Joseph: The hon. Gentleman says that quite rightly. I am not judging those facts but simply explaining the extent to which the taxpayer and ratepayer subsidise students. I do not quarrel with that. But I must point out that that subsidy is paid by a taxpayer who lives, alas, in a much less prosperous country than many of his continental neighbours do. However, I shall speak about relative prosperity in a moment.

Mr. John Powley: Given the level of funding that Governments put into student benefits or higher education, are we not entitled to expect a reasonable standard of conduct from the students who have the advantage of being educated? Is my right hon. Friend aware of the actions of the student union at the University of East Anglia in my constituency, which yesterday effectively banned Conservative students from operating within the university in anticipation of a visit from my hon. Friend the Member for Luton, North (Mr. Carlisle) to speak? That means that the local Member of Parliament is also effectively banned from speaking to students at the university.

Sir Keith Joseph: I was not aware of that until my hon. Friend told me just before this debate. If the facts are exactly as he has been informed, I am considerably worried by that news and will make inquiries.

Mrs. Kellett-Bowman: Is my right hon. Friend aware that the students at Lancaster university met and, by a vote of two to one, decided to give entirely free speech at the university, which is as it should be?

Sir Keith Joseph: Quite right too; and Lancaster is by no means the only one. Yet there is all too much evidence that some higher education students do not behave in that civilised way.
As the hon. Member for Durham, North reminded the House, it was a Conservative Government that introduced student grants. The maintenance grant now provided is not quite as much as some students would like, but it is a great deal more generous than that provided by much more prosperous countries.
I have been given some evidence relating to the difference of opinion between Members on the Front Benches. I stand corrected in the correction that I tried to introduce. It appears that the figures used by Opposition Front-Bench Members were of qualified participation rates, that is, the proportion of people with qualifications for entry to higher education, whereas I was talking about the age participation index. That explains the difference between us. I apologise to the hon. Member for Durham, North, but his figures do not support his arguments, because the age participation index is substantially higher than when the last Labour Government left office.

Mr. Radice: I quite accept that the age participation rate is higher now than in 1979. It is a very good thing that it is. What I was saying was that the qualified participation rate—that is, the percentage of qualified people going into higher education is now lower than it was in 1979. I am quoting now from a reply which the Under-Secretary gave in the House on 10 March. It is the Minister's own Department's information.

Sir Keith Joseph: I call that roughly deuce.
The maintenance grant may not be as much as some hon. Members would like, but it is a great deal more generous than that provided in more prosperous countries which, on the whole, provide maintenance through loans rather than grants and which generally leave students to earn or borrow at least part of the money for their own maintenance. Not every student feels that the maintenance grant is inadequate. Letters have appeared in the press, pointing out that for some it is perfectly adequate. It is also considerably more than a single pensioner tends to get.
I must also remind the House that most students are on their way to relatively prosperous and satisfying careers. It is quite true that what they do is not only for their own benefit but potentially benefits the country. Nevertheless, the people who pay the maintenance grants and tuition fees are, in most cases, on average, poorer in their careers and in their earnings than students will be.
Nor is it enough to assume that the more students we have in higher education the more prosperous the economy. Higher education is a necessary but not a sufficient condition for prosperity and full employment We need enterprise, we need risk-taking and we need, above all, to be competitive, as well as to have qualified people.
Although our economy is considerably stronger than it was, although we are substantially more productive than we were in 1979, and although there is better understanding in the country of where jobs and prosperity come from than there was in 1979, the countries which compete with us are also improving their performance and, compared with them, we are still considerably less prosperous. It is by an improving but still substantially less prosperous economy that students are supported, with all their tuition fees paid and a very substantial amount available for maintenance.

Mr. Nicholas Winterton: rose—

Sir Keith Joseph: No, I will not give way. I think that I am coming by chance to the very points that my hon. Friend wants to make. But I cannot give way even if I am not.
Of course, we regret having to ask the more prosperous parents for the contribution that we seek from them. I do


not foresee that any Government will be able quickly to dispense with that. I must remind hon. Members that the contribution to maintenance by those parents, even those who pay the full amount and for whose children there is no maintenance grant, amounts to only half the average subsidy provided for the tuition fees. In the context of an economy which is improving but which is still not as prosperous as we would like, I do not think it entirely wrong that students should not look to the taxpayer for total protection in every circumstance, bearing in mind that the average taxpayer is considerably poorer than most students will be in the course of their careers. That is no reason, however, for the Government to impose severe and unexpected costs beyond the scope of students to meet, so we shall consider very carefully the report which is due to be put in Government's hands in the next few weeks.
I hope that the House will reject the motion and accept the amendment.

Mr. Clement Freud: We are tonight debating the Government's policy on student grants and student benefits, if "policy" is not too strong a word for what the Government have in mind. The official Opposition, from the good motion on the Order Paper, are obviously unhappy about what the Government are doing, and we in the Liberal and Social Democratic parties totally agree with the official Opposition. [HoN. MEMBERS: "Where are they then?"] I imagine that my colleagues are in roughly the same places as most other Members' colleagues who are not in the Chamber.
The Opposition parties are solid in their disagreement with the Government, although different parties will have different views about the remedy. It seems to us—by "us" I mean virtually all Members of the House—as if there is some hidden agenda which the Government have in respect of students and about which they have not told us. The Secretary of State speaks of a record proportion of students. I would like to remind him that there is also a record amount of apprehension among students who do not know what is to happen next. This benefits no one. The accepted status of the student appears to be under attack. First, the Government are doing all in their power to reduce their numbers, unless they happen to be financially independent; and, secondly, they say that if anyone manages to buck the system and manages to get to university, polytechnic or college of higher education, they will lose their entitlements, both legal and financial, although I suppose that they will still have their health care entitlement.
These changes are being introduced with no explicit admission that the basis of entry to further and higher education is to be changed, or that the choice about institution or course is to be shifted. I should like the House to look briefly at the proposed changes. I refer first to the withdrawal of supplementary and unemployment benefits during short vacations, as a prelude to complete withdrawal, as is stated in the social security Green Paper.
Apart from our general concern that the Government are making the existence of students even more difficult, my main concerns are the inability of students, parents and, indeed, the teachers who prepare students to plan ahead, and the inherent wrongness of what is proposed.

We have rules about benefits. The rules are that if one pays contributions one receives unemployment benefit. Now one can pay contributions and receive no benefits if one is a student. The point about supplementary benefit was that one received it according to one's needs. That is why it was called supplementary benefit. Now, with the proposed compensation, we shall have to tell students if they are in need—as were 275,000 students; to quote the number from a reply given by the Prime Minister to the hon. Member for Denton and Reddish (Mr. Bennett) —that they are not covered.
The Secretary of State said that some students will be unaffected. He is wrong. The 140,000 students—I use the same reply by the Prime Minister—who claimed nothing at all will now receive £36 a year. This scheme makes the equalisation of the reimbursement of students' transport costs look, by contrast, like enlightened legislation.
As for housing benefit, students need it because there is no standard housing cost for students. We as a nation are proud that there is no standard housing cost. Different universities and colleges have different types of accommodation to suit different types of students. I refer to the different situations in different areas — from private landlords to medical students postgraduates who work a longer student year, mature students as well as conventional undergraduates who live in college accommodation. Housing benefit was the only mechanism that recognised that different students had different needs and it catered for those needs. The housing benefit review team which advocated the removal of housing benefit from students made it clear that this should be dependent upon a thorough overhaul of the student grant system. The Government have taken note of the first comment, but they have ignored the second.

Mr. Nicholas Winterton: Does the hon. Gentleman share my hope that the Secretary of State and the Government will heed not only the report of the Select Committee on Social Services about a review of social security but that they will also, and even more importantly, pay attention to the report of the Social Security Advisory Committee—which the Secretary of State said is expected soon—and that if they highlight examples of genuine hardship amendments will be introduced by the Treasury Bench during the passage through the House of the Social Security Bill?

Mr. Freud: I am grateful to the hon. Gentleman for his intervention. I hope that the Secretary of State will heed all advice and that he will stop heeding solely the advice that he receives from the Treasury.
I have said in the past that this Government have no education policy, simply a financial policy in which education has to fight for survival. Now we see benefit changes determining education issues. If the Government want students to work their way through college—the increased earnings limit as well as ministerial exhortations, suggest that, and we have heard the Secretary of State refer to occasional part-time earnings—I wish the Secretary of State would say so. I wish he would say that unless one goes out to work one cannot go to university.
I put it to the right hon. Gentleman, first, that there are no jobs and, secondly, that in evidence given to the Select Committee the opinion of many academics was that it is completely unhelpful to our kind of university and


polytechnic education, in which high quality courses are given within a short timespan, to have students seeking employment elsewhere. I use the word "seeking" advisedly because it is the search for work which takes time, is dispiriting and unhelpful to someone's pursuit of a degree.
If the Secretary of State wants students to study only at local institutions and to live at home, I wish he would say so. I believe the strength of our system lies in the fact that one can select a course, even if, in the end, it tends to be the computer that selects the student.
If the Secretary of State wants students to have loans, I wish he would say so, rather than hide behind the claim that a loan is a private arrangement between the bank and the customer.

Mr. Andrew F. Bennett: Is the hon. Gentleman able to say whether the policy of the right hon. Member for Plymouth, Devonport (Dr. Owen) is being considered by the Liberal party as well as by the Social Democratic party, or has it been rejected?

Mr. Freud: The right hon. Member for Plymouth, Devonport (Dr. Owen) referred to student loans and said specifically that it was not the policy of the two parties but that the possibility of student loans ought to be investigated. The two parties have the same goal but different routes to reach it. There must be minor changes in approach to policy.
What dialogue has the Secretary of State's Department had with the National Union of Students to try to simplify matters? The official justification for the changes has always been that it involves a high administrative cost. We are apprehensive about that. Rather than wipe out whole categories of claimants just because it is administratively difficult, the Secretary of State ought to take more advice from more people and find out to what extent the administration can be simplified. I accept that there are instances where the cost of administering it is absolutely unwarrantable. Each student fills in a different form each term, printed in different colours, to be signed by different people. I maintain that it would be far more sensible to take advice anti to try to eliminate this unwarrantable expense rather than eliminate the payment.
It seems that the number of claims has increased because the grant has fallen and students are in need. This is the direct result of Government policy. However, we believe that to maintain the present system by putting more money into it, which is the Labour party's approach, will not solve the problems or meet the new demands of the 16 and 19-year-olds. [HoN. MEMBERS: "Rubbish."] If the Labour party has new ideas to put forward, it has not made them very clear. The changes that we are discussing are symptoms of a system that is on the edge of collapse. Tinkering with it will not, therefore, do. The structure has to be recast so that it can work properly.
As with the tax credit scheme, we seek to integrate student grants, taxes, benefits and housing needs. We would give a student grant by virtue of studenthood, with additions according to need. I am opposed to the idea that because one is a student one fails to qualify for benefit. We contend that to be a student is a worthy calling and that students should not be eliminated from benefit, which this policy seeks to do. The system needs recasting to give it the stability and integrity that has been lost. The

Government believe in a ritual of hardship, with the only escape route being rich parents or sacrificing study for work.

Mr. Powley: The Government have to find the money, but the Opposition do not.

Mr. Freud: Yes; but the Opposition must point out their priorities. Both Opposition parties see the need to build up a skill base over the coming decades, and give that much more priority than the Government do.
The basis for our motion, had it been our turn to table one, which, sadly, happens seldom, would have been to occasion a full and open review between Departments, local government and others with interest, such as the NUS and the college authorities, to find a new integrated structure. That structure would benefit further and higher education, and provide more places for our youth to acquire skills. My right hon. and hon. Friends—

Mr. Powley: Where are they?

Mr. Freud: They will be here—will vote for the Opposition motion.

Mr. J. F. Pawsey: I was a little disappointed that the hon. Member for Cambridgeshire, North-East (Mr. Freud) was not somewhat more forthcoming about the policy of his alliance partners. How far, for example, would they follow the loans route? Are they arguing for total loans or for interest payments on loans? I would not dream of implying that the hon. Gentleman is two-faced, but, as usual, the alliance seems to be facing two ways. It seems a pity that for once we did not receive a straightforward statement about its policy.
No one likes to see his income reduced, even if that reduction might seem to be justified on the grounds of fairness. As my right hon. Friend the Secretary of State said, student support in the United Kingdom continues to be the most generous in the western world. It is significant that neither of the Opposition Front Bench spokesmen has denied that. Clearly, the House must therefore accept that our student support continues to be the most generous in the western world. That point at least should be remembered when the rhetoric has been forgotten. Other countries apparently believe that when students graduate they can expect to receive substantially higher incomes than those who are not graduates.

Mr. Robert N. Wareing: If they can find a job.

Mr. Pawsey: The hon. Gentleman will have the opportunity to make a speech and to put his points as he thinks fit.
Those who graduate from university will have the opportunity to earn substantially higher incomes than those who leave school at 16, 17 or 18 and then go into industry, and help, through their tax payments, to fund students. Clearly, most students will earn substantially more than many who leave school early. It may be for that reason that many countries insist that advances made to students are repaid. But, whatever the reason, no other nation treats its students as generously as we do.
It is worth recalling that the cost of student support, excluding tuition fees, now totals about £500 million. If one considers the total value of awards, including fees, one


sees that in 1978–79 they totalled about £528 million and that by 1985–86 the figure had increased to £815 million—a substantial sum, no matter how one looks at it.
I regret that the promised review of student support has been abandoned. That is particularly unfortunate as it raised expectations which, sadly, have not been fulfilled. It proposed to address itself to the question of loans. I was interested to hear the comments of the hon. Member for Ipswich (Mr. Weetch) about loans which students receive from banks. Clearly, if loans are of the magnitude which he suggested, it would be more logical to introduce a more formalised system of which students may take advantage.
Certainly no one advocates a complete system of loans, and if they were introduced, there should be a basic grant which could be topped up by a loan to the extent to which a student feels is appropriate. Interest rates should be lower than those paid through the clearing banks. That would represent a step forward. It is unfortunate that the review did not reach a conclusion. Indeed, it suffered a somewhat abrupt termination.
The problem which faces my right hon. Friend and Governments of all colours — it certainly faced the Labour Government between 1974 and 1979 — is that the taxpayers' pound can be spent only once. There is nothing magical about it. It can be spent, for example, on social security, student support or the police. Opposition Members are beginning to accept that. If one votes additional funds for students, one must ask where the additional funding will come from. It will come from extra taxation which, for example, will be paid by exactly the same parents who are at present expressing anxiety about the level of grants.

Mr. Nicholas Winterton: My hon. Friend is talking about producing additional funds and asking where they will come from, but we are also talking about taking away money of which students have had the benefit in recent times, through supplementary benefit and housing benefit. Does my hon. Friend agree that, if the Government are changing the system, perhaps the Department of Health and Social Security should pass certain resources to the Department of Education and Science so that student grants can be increased by the amount by which assistance is being reduced under the social security and housing benefit reductions? Does he agree that that is justice? It is both wrong and hard to take from people something which they had, and which they took into account in deciding how to pay for accommodation, maintenance and so on at university.

Mr. Pawsey: I thank my hon. Friend for his typically thoughtful intervention. I agree that it is always difficult to remove a benefit which someone has enjoyed for some time. I shall refer to housing benefit and supplementary benefit later in my speech. I am sure that my hon. Friend will join me in welcoming our hon. Friend the Minister for Social Security to the debate. When he replies I am sure that he will deal in detail with my hon. Friend's question.

Mr. Radice: Cop-out.

Mr. Pawsey: I thought that the hon. Gentleman copped out in his speech once or twice. The alternative to increased taxation would be to increase borrowing, which leads to additional inflation or to cuts.
Labour Members know a great deal more about cuts than we do. Let me refresh their memory about an extract in Barbara Castle's diary. [HON. MEMBERS: "Boring."] I am sorry that this does not please Labour Members. Boring or not, they will have to listen to it; they do not even know which extract it is. It reads:

"All things bright and beautiful
All projects great and small
All things wise and wonderful
Denis Healey cuts them all.
Healey cuts the old age pension
Although he cuts by stealth
And when he looks for savings
Healey cuts the National Health."

That is the record of Labour Members. It really is a cheek for them to tell us about cuts and to grumble about the amounts that we are seeking to adjust.
Labour Members, in the clear knowledge that they will not be forming an incoming Administration, can promise anything they wish. They have said that they will increase levels of student support. That promise, added to all the other promises that they have made over the past six or seven months, would undoubtedly represent a substantial increase in taxation.

Mr. Freud: Why is the hon. Gentleman defending cuts when the Secretary of State said that there were no cuts?

Mr. Pawsey: My right hon. Friend has been saying that one is seeking to adjust levels of student support. He has been careful to point out to the House that the number of students has increased dramatically. He gave a figure of some 80,000. Clearly, when one adds in those 80,000 additional students, what cut can there be in the totality of student support?
Let me return to my theme that Conservative Members are not unsympathetic to students. It might help to put matters into perspective if I quote from The Listener. The Listener is not usually regarded as being an organ of the Conservative Party but it really answers the question posed to me a moment ago by the hon. Member for Cambridgeshire, North-East (Mr. Freud) and he might find it helpful if he listened rather than thumbing through the book on his knees. It said:
The fact is that after five years of what we are repeatedly told have been 'savage cuts', there are more students in higher education now than ever before. The polytechnics are booming: graduates and first-year entrants both stand at record levels; applications for this October"—
October 1986—
are officially described as `buoyant'.
There is not much gloom and doom in that article.
The Government have a duty to protect taxpayers, parents and students. They must strike a balance. I understand that changes in supplementary and housing benefit are unpopular, but we should remember that the social services were designed to help the poor, sick and elderly, and not those who will be tomorrow's highest wage earners.

Mr. Derek Fatchett: The hon. Member for Rugby and Kenilworth (Mr. Pawsey) left me somewhat confused. I am not clear whether he was advocating the abolition of student maintenance grants and the support of loans or whether he was trying to redivide the cake, and in the process pretend that he is not enhancing misery by cutting the income available to individual students, or whether he was totally confused by his arguments and the facts available to him.

Mr. Pawsey: rose—

Mr. Fatchett: No, I shall not give way to the hon. Gentleman immediately.

Mr. Pawsey: The hon. Gentleman does not wish to be unconfused.

Mr. Fatchett: No.

Mr. Fatchett: I rest my case.

Mr. Fatchett: I suspect that the hon. Gentleman will not be able to unconfuse me, if his track record over the past few minutes is anything to go by.
It might be useful if the hon. Gentleman were to have a look at one or two other facts after flicking through Barbara Castle's diaries. He might be interested to know that the real value of student maintenance grants increased under the Labour Government between 1974 and 1979. If the hon. Gentleman wants to check that fact, he will not find it in Barbara Castle's diaries but in a parliamentary written answer of 28 January 1985. When he criticises the Labour Government's record on student grants, let him get the facts right, not work on prejudice. He should look at the record of that period.
If the hon. Gentleman could come to the House and say that the Government have a similar record to that of the Labour Government, his arguments might have some credibility. But the reality of tonight's debate is that it is taking place against a backcloth on which we have seen student incomes deliberately cut by the Government. Everybody accepts, as did the Secretary of State, that the real value of student grants has been cut by 19 per cent. during the Government's lifetime. He was shocked when he thought that he heard my hon. Friend the Member for Durham, North (Mr. Radice) say 90 per cent. He probably did not feel that it could have gone quite that far but was happy with 19 per cent.
The announced increase in student grants —this massive figure of 2 per cent. —will mean a further decrease in the real value of student grants. That is the backcloth and those are the facts. The hon. Member for Rugby and Kenilworth should recognise that. He should have the courage to tell the House, students and parents, that the Government are cutting the real value of student grants because they do not want to spend as much money on student maintenance. That would be an honest argument. The hon. Member for Nottingham, South (Mr. Brandon-Bravo) agrees with that. He wants to cut back and I suspect that he will be going round Nottingham university and Trent polytechnic telling students and their parents that he will expect them to welcome that policy.

Mr. Brandon-Bravo: I have done just that. Honesty is the only policy in this debate.

Mr. Fatchett: If one has a short life in politics it should be a sweet life. I doubt whether the hon. Gentleman will be here after the next election and I am sure that the students will welcome his honesty in that respect.
We have those cuts which have already taken place, and now we have the further cuts that are likely to be implemented as a result of the changes in the social security regulations. I do not want to go into detail, but I recognise, as I think other hon. Members have, that the proposed cuts in housing benefit will have a deep effect upon student incomes and living standards. It will be difficult for students to secure tenancies in a city such as

Leeds and to maintain those tenancies without the benefit of being able to claim housing support through the social security system.
The changes that the Government are proposing and discussing will adversely affect students. I have no faith in what the Secretary of State said about consultations having taken place and the Government listening to the comments and advice before making decisions. Students, like everybody else, know that consultation with the Government is a one-way street. They listen, but simply do not heed the comments corning forward. If I were a gambling man I would suggest to the Minister that what will emerge from the consultation process will probably take a similar shape to the proposal currently on the table. Students will suffer severe cuts as a result of the proposal.

The Minister for Social Security (Mr. Tony Newton): Obviously, I want to assure the hon. Gentleman that we shall look at the consultations. But, leaving that aside, I am sure that he would not wish to mislead the House. He did rather convey the impression that he did not recognise that the proposals currently on the table, to which he referred, do not change the right of students to claim housing benefit for privately rented accommodation at any time during the year.

Mr. Fatchett: I recognise that point—

Mr. Newton: If they are living there.

Mr. Fatchett: That is right. The Minister's final qualification will cause difficulties to students.
We have a backcloth of cuts in students' living standards. I wish to develop the argument, because the debate is not only about social security or student maintenance. It is about access to higher education. We have an elitist system, whether we like it or not. It is structured so as to broadly discriminate against women, to discriminate strongly against the ethnic minorities, and even more strongly against those who come from social classes IV and V. No hon. Member could be satisfied with our participation rate from those sectors.
What will happen in the future? Ministers often say that higher education is an investment, that we should invest in skills in new technologies, and that we need brains and students who are trained. I agree with those arguments, but our record in that respect compares unfavourably with the record of all our major competitor countries. We must spend more to bring us in line with other countries. The Secretary of State said that spending money on higher education is not a sufficient condition for improved economic performance. No one would disagree with that. He also said that it is a necessary condition for improved economic performance, and I share that view. But if it is a necessary condition for improved economic performance, we must widen access and make it possible for all sections of society to obtain higher education. By adopting the Government's policies on students, we are curtailing the possibility of investment, restricting access to higher education and reinforcing the elitist system.
The major criticism of the Government's attitude to students and higher education is that they have pushed back all the possibilities of opening up our higher education system. It was clear from the arguments between the Secretary of State and my hon. Friends the Members for Durham, North, and Denton and Reddish (Mr. Bennett) that, under the Government, the


participation rate of those who qualify for higher education has declined. That is a serious indictment of the Government's education policies.
The hon. Member for Cambridgeshire, North-East (Mr. Freud) said that the Government's policies are unclear. He asked whether they want to introduce loans by the back door and whether that is why they are forcing more parents to make contributions. I do not believe that the Government's policies are unclear. They want to cut student maintenance and the opportunities for people to enter higher education. Society will condemn the way in which they have treated people with ability and potential. Britain will condemn them for the fact that they have made it impossible for many students with qualifications and ability to benefit from higher education. Unless we reverse those policies, our higher education provision will decline further and we shall have an even stronger elitist system. I object to that, and I hope that, at some stage, the Government will recognise the danger, not just to individuals but to the education system.

Mr. Patrick Nicholls: Two things are clear from the speech of the hon. Member for Leeds, Central (Mr. Fatchett). First, his speech was completely sincere and doubtless he completely believed what he said. The problem is that he painted a version of the facts that is so wholly at variance with the real facts that there is a danger that the criticisms which could be levelled at the Government will be entirely missed. The Government's record on higher education generally and on student grants specifically is creditable. I say that even though, in 1984, it took a fairly hefty effort from Conservative Back-Bench Members to keep it that way.
Whatever may be the long-term benefits of investment in higher education, the simple fact of life is that the money must be found from somewhere. The only place where it can be found is in the nation's taxes. The money cannot be said to be self-generating. If the history of post-war Socialism as practised by both main political parties has taught us anything, it is that the mere idea that we should spend money on things simply because they are worth while—

Mr. Robert Rhodes James: Was it a waste of taxpayers' money to invest in the Spitfire?

Mr. Nicholls: I do not know how my hon. Friend plans to bring Spitfires into the debate. After that encouraging taste of what is to come, I await his speech with interest.
My point is that we cannot spend money on something simply because it is a good idea. If we adopt such a policy, it leads to nothing worth while, only to conversations in car parks at Heathrow airport, with the Chancellor of the Exchequer being turned round and forced to return to give an account of himself to the International Monetary Fund.
Investment in higher education must reflect those economic facts of life. Indeed, it must go further than that. The Government's problem is that they lack flexibility in their attitude to the funding of student grants. The mere fact that the system for funding student grants worked well in the 1950s does not mean that it will work well in the 1980s. The Government have got it wrong in that respect because they are not maintaining the flexibility of approach.
It will not be enough to continue saying, true though it may be, that we have the best system of student maintenance in the Western world. That is not the point, and that is not the standard by which we shall be judged. We shall be judged by the fact that, compared with what we have done for our students in the past, what we are doing now is not good enough. It is not much consolation if one's Rolls-Royce is misfiring to be told that the man down the road has only a mark II Cortina. Such arguments do not answer the point.
My hon. Friend the Minister for Social Security, who will reply to the debate, has drawn the short straw. Between 1978–79 and 1985–86, the real value of student maintenance grants has decreased by about 10 per cent. My hon. Friend's difficulty is that, while acknowledging that that is the position, the Government have not yet decided what to do about it. The Government seem to have headed for a desert island, marooned themselves there, and broken their lifeboats. There was a way out for them. They could have done what it looked as though they would do, and said, "The system is no longer sufficient. We shall have to consider student loans." It looks as though they will not do so.
It is not for me in a short debate to set out a blueprint of how student loans might have operated. Suffice it to say that there are enough examples worldwide on which we could have drawn, but because we have abandoned any such approach, we have landed ourselves in the worst of all possible worlds. No Conservative Member can be happy with the position into which the Government have locked themselves. We seem to have cut off any opportunity of extricating ourselves from that position.
There is no doubt that the Government's record on funding higher education is creditable. That is why it will be no hardship for me to support the Government tonight. But the system to which we have nailed our colours does not allow us to tell the public that that is the way it really is. If my hon. Friend could mention a radical initiative or hold out some hope that a system which is beginning to fail can be brought up to date, we could tell the public the undoubted truth—that we have a creditable record. If we lock ourselves into a situation in which we are obliged to decrease the student grant, when we have cast away any possibility of doing something about improving that situation over the 1980s and 1990s, then truth and logic will still be on our side, but there will be a grave danger that people outside the Chamber will simply not realise it.

Mr. Jim Craigen: I hope that the hon. Member for Teignbridge (Mr. Nicholls) sends a copy of his speech to every student in his constituency. When I listened to the speech of the Secretary of State for Education and Science I thought that there was, after all, something to be said for the Scottish Office taking further, higher and university education under its wing, especially when the Secretary of State was replying to my hon. Friend the Member for Ipswich (Mr. Weetch). It was like trying to squeeze a dry sponge—no matter how hard one tried, nothing of substance came out.
The Government have a cheek to table such an amendment to our motion. In the numbers game, how honest are the Government being over the figures that have been bandied about? Surely in the 1980s it is not too much to expect that a greater proportion of our post-school population might usefully, if not enjoyably, benefit from


higher education. Surely in the 1980s, with higher hopes and ambitions than in the 1970s and 1960s, we can achieve more.
If there were the same level of participation in higher education among 18-year-olds as there was in 1973–74, another 40,000 people would be in higher education. Does the Secretary of State not know that between 1973–74 and 1983–84, the proportion of 18-year-olds in the United Kingdom rose by 25 per cent.? He must recognise that not only have there been demographic changes but that there is greater competition to get into higher education.
Moreover, the Government should recognise that there should be some scope for older people who wish either to take up for the first time, or augment, higher education studies. There are also quite a number of young people who because they cannot get a job as a result of the economic recession, are filling in at least a part of their unwanted leisure time by attending university courses. A slight problem sometimes arises, about which the Minister will be aware, that such studies must be for under 12 hours, and the students must be available for work. I have one or two constituency cases that have, fortunately, been sorted out.
The change in housing benefit will be the most savage aspect of the Government's package. Notwithstanding the intervention that the Minister for Social Security made in the speech of my hon. Friend the Member for Leeds, Central (Mr. Fatchett) many young people are distraught about what faces them as a result of the proposed housing benefit changes. If young people are able to get private rented accommodation, they will not easily be able to say to the landlord that they will not be there during the summer months, and therefore do not want to pay, because they will be staying with their parents, but they expect the accommodation to be available when they return in the autumn. The Minister should understand that the whole character of parental support has altered. Far more families have at least one member unemployed, and there are far more single-parent families and families in which the income is not particularly substantial, so there is not the secondary support available for those students who, perforce, are living away from home.
How honest are the Government being over the uprating of student grants? Did not the Department of Education and Science say in negotiations that it was taking account of the present social security system when it uprated by only 2 per cent.? Now, it is proposing that the massive changes in the social security system will be ignored, and the students will still get only a 2 per cent. uprating. The Government are failing to recognise the cost of accommodation, which is one of the biggest outlays that students have to face.
I listened to the Secretary of State's speech intently. I do not often listen to him because much of the education system in Scotland comes under the Scottish Office. It surprised me that a Government made up of so many people whose curriculum vitae shows that they enjoyed the benefits of higher education are so reluctant to see present and future generations benefiting from higher education. The Secretary of State does not need to pass a law to increase the number of drop-outs in our system. The pincer action that the DHSS and the Department of Education and Science have in mind will do that for us. By grant erosion and social security exclusion, we shall create more dropouts in the higher education system.
I listened to all this business about loans. There will be the introduction of a pawnbroking economy with the higher education system that the Government propose. We have just finished a debate on the City of London. Presumably the loans system is to breathe fresh life into the financial institutions. The students will not have any say in what the rate of interest will be. It shows up the Government's ineptitude in managing the economy that interest rates are so high.
The Secretary of State for Education and Science has much to answer for. It strikes me that the hand of Joseph has been disastrous wherever it has touched. As an example of that I need only look at the Health Service and see the bureaucracy that abounds there because of the right hon. Gentleman's previous influence. The state of industry in this country is another testimony to the right hon. Gentleman. Half the problems which must now be solved in education are due to the declining fortunes of industry in this country.
What a record the right hon. Gentleman has. Since Victorian times this country was able to export more manufactured goods than it imported and now, under this Government, the exact opposite is the case. I hope that the Secretary of State for Education and Science, who is on his way out, does not take the whole higher education system with him in his passage.

9 pm

Mr. Robert Rhodes James: I thought we were supposed to be debating higher education tonight. I apologise to you, Mr. Speaker, and to the Minister of State and the Secretary of State for being absent at the beginning of the debate for reasons which I hope will be understood.
The House will be aware that, in December, I resigned from my position in my party on higher education matters for a combination of events. I regretted the so-called 2 per cent. increase in student grants. I also regretted the benefit proposals made for students. I regretted also the abandonment of the grant review in which I was involved and the failure to deal with the threshold of parental contributions. All these matters dealt with the future of higher education.
I hope that I have made clear my profound affection and admiration for my right hon. Friend the Secretary of State. Although we disagreed, we did so on a matter of principle, and we disagreed sincerely. I once wrote to my right hon. Friend in a memorandum and said that it was possible that he might be right.
When one looks back at the sad situation of higher education, one realises that we have failed to grasp the problems of the way we fund research. We have failed to grasp the topic of higher academic salaries which has led to a real and serious brain drain. In fact, a constituent of mine who is a plasma physicist earns less than a secretary working in London.
The situation has deep-rooted problems and dates back to the Green Paper "The Development of Higher Education into the 1990s" which was published last summer. In retrospect, I should have protested more strongly than I did at the time about the Green Paper. I described it as illiterate, innumerate and philistine. I recently reread it and was reminded of that famous phrase: "I am astounded at my own moderation."
I feel very deeply about that Green Paper. Paragraph 1.3 of it states:


The Government is particularly concerned by the evidence that the societies of our competitors are producing, and plan in the future to produce, more qualified scientists, engineers, technologists and technicians than the United Kingdom.
Why is that so? It is because our competitors have invested in higher education. They are the recipients of investment made in the past.
The Green Paper is wrong because my right hon. Friend starts from a position of defeatism. His principle is that, because our competitors are rich, they can afford these luxuries. They are not luxuries; they are the future of our nation. The Japanese, Americans, Germans, South Koreans and everyone else understands that. Why do we not understand that?
There is a real brain drain and underfunding. However, the problem is not simply one of funding. If one could throw money at the problem to resolve it, it might be resolved, but it is more complex than that. I would like to make a proposal to my right hon. Friend. I do not believe in Royal Commissions. However, given the fact that the Robbins committee has unhappily been proved wrong, could we not have a real working group which involves people from industry and business, higher education, the state and independent schools, the universities, polytechnics, Government and local authorities?
Cannot we get together and ask ourselves, "What is higher education for?" The answers we give may differ, but that is the key question. We need a small element of humility. During the 1960s, we made several assumptions, most of which were proved wrong. There was a huge expansion of higher education which was ill thought out. We then went from the euphoria of expansion to total disillusionment, which was also wrong. More did not mean worse, but it did mean disappointment.
We should have the finest higher education system in the world, but we have not. Regardless of party and attitudes, we should ask ourselves why and where we have gone wrong. What can we do to make the system right? We have moved from dangerous euphoria to perilous disillusionment. We should return to the middle way and try among ourselves to provide the finest higher education system in the world. This is needed not just for the present generation or for our children; it is critical for our country's future. We survive on our brains and our ability, not on our brawn. That is what is at stake.

Several Hon. Members: rose—

Mr. Speaker: Order. It might be convenient to the House if I say that I understand that the first of the Front-Bench speakers will seek to rise at 9.40 pm. Four hon. Members who have been present during the debate would like to take part. Perhaps hon. Members would bear that in mind.

Mr. Robert N. Wareing: The Government's proposals are yet another sign of the sort of society that they are attempting to create—one with decided class divisions wherein opportunities in education, as in health and social services, will depend on how much people have in their pockets rather than on their qualifications, abilities and talents.
There can be no doubt about the reality of the Government's proposals. Since the Conservative party

came to power in 1979, there has been a real cut of 20 per cent. in the value of student grants. As well, many potential students have found that they remained potential students because they would not be able to study in the lower levels of education. Discretionary grants have been cut or have been completely abolished by local authorities which have had their rate support grant reduced from 61 per cent. to 46 per cent. of current expenditure. In many parts of Britain local authorities have been rate-capped.
What chances do young people in my constituency have? In one part of my constituency in Liverpool 94 per cent. of young people are unemployed. What chance do they have even of starting on an ordinary A-level or O-level course? The local authority cannot afford much by way of discretionary grants. We need not look for poor young people entering higher education in two, three or four years, because they will not be there. They will not have had the wherewithal even to obtain A-levels and O-levels.
Any increase in the university student population will not come from the ranks of those living in Norris Green, Croxteth and the poor areas of Liverpool. If parents, most of whom are unemployed, struggle to get their offspring through sixth form, through their A-levels and O-levels and through colleges of further education and if those young people are able to go on to university, with what will they be faced? Under the Government's proposals students will be faced with a reduction in housing benefit and they will find that supplementary benefit is denied to them during their vacations.
When the Minister replies I hope he will tell me what encouragement there is in his proposals — he is proposing to deny social security benefits to students—for the parents in the poor areas of Liverpool and elsewhere to struggle to get their children an education. Conservative Members have referred to loans, but such loans must be repaid. There are many young people who have struggled to get to university but then find they cannot get a job. How does an unemployed graduate pay back a loan to a bank, the Government or any other institution?

Mrs. Kellett-Bowman: I feel strongly about loans. There would clearly have to be a provision whereby one did not start to repay the loan until one was earning a certain amount. That would thus rid us of the great problem of the reverse dowry on girls. This works well in other countries. Such a policy would give youngsters more independence from their parents and they would not run up haphazard bank loans.

Mr. Wareing: The future of the young people I am discussing is a future of unemployment. However, it does not mean that, because they have the prospect of a jobless future they should be denied the possibility of securing educational qualifications. They are denied this because few young men or girls whose fathers or mothers are unemployed and who live in deprived conditions would borrow money from a bank to get their education.

Mrs. Kellett-Bowman: There would be a proper scheme.

Mr. Wareing: Under this Government few young people would have the prospect of being able to repay that loan. More is required to deal with the problems of further and higher education. Successive Governments have not


dealt with the problems. The next Government — the Labour Government — will, I hope, act in a different way from the previous one.
I wish to refer to the payment or non-payment of supplementary benefits to young people who, during a period of unemployment, enter colleges of further education on a full-time course to gain qualifications. It would be interesting to know from the figures bandied about concerning the increase in the student population, what proportion of those students are involved in courses which lead to Mickey Mouse qualifications—the type that this Government have introduced. How many colleges of further education for example, are dependent upon courses which are provided through the Manpower Services Commission?
Unemployed youngsters may wish to use such time to study and gain qualifications. Those who study for O or A-levels will find that, because they are on a full-time course or are studying for over 21 hours a week, they will be denied a discretionary grant from the local authority for the reasons I have mentioned, and also denied supplementary benefit. I admit that the same was true under the Labour Government, but that does not make it right. It is ludicrous that supplementary benefit can be paid to somebody who decides to languish at home, but that it is denied to somebody who steps through the door of a college of further education.
Much more should be spent through the Department of Education and Science. I do not want the Department of Health and Social Security to be involved. There should be a mandatory grant paid through the DES. Some Conservative Members are loth to spend more money on grants. They talk of the poor taxpayer. "It is not our money," they say, "it is the taxpayers' money." Meanwhile, they are helping out some of the rogues in Johnson Matthey and spending money on Trident as if there were no tomorrow. They do not refer to the taxpayer then.
We should ensure that the future is prosperous. We can do that only by making real investment in people. That means expenditure on higher education. It is no use saying that other countries are richer than us and that they can therefore provide more. Our future riches depend on what we invest in our young people today.
Access to education should not be based on class. It should not be a matter of whether a parent can afford to send a youngster to university. However, during the past six years, the parental contribution to students' upkeep has increased by 170 per cent. To a poor family—and there are more poor families under this Government—to a family in which the breadwinner is unemployed—and there are more unemployed breadwinners under this Government—that is the toll which tells.
I do not believe that the exercises and policies of Ministers and their Departments have anything to do with education or health. Everything is aimed at reducing expenditure, so that the Chancellor can provide more than the £2·5 billion that he has already provided for his rich friends through tax cuts during the past six years. That is what it is all about. As soon as people realise that that is the reality, they will not be fooled by arguments about the Government being interested in education.
I am only sorry that the hon. Member for Cambridgeshire, North-East (Mr. Freud) was unable to spell out Liberal policy. I hope that his party's policy would be more beneficial than what we experienced under

Liberal control in Liverpool between 1973 and 1983. During those years, we had the first cuts in discretionary grants. Even under Tory administrations in the 1950s and 1960s, there were generous grants.
Our only hope is that enough Conservative Members who share the anxiety of the hon. Member for Cambridge (Mr. Rhodes James) will have the guts to defy their Front Bench.

Mr. Martin M. Brandon-Bravo: My constituency is proud to contain two most excellent institutions of higher educaton — Nottingham university and Trent polytechnic. I am not sure of the precise figures, but I estimate that our city must have some 20,000 students within its boundaries. It would be comparatively easy and perhaps convenient for me to court popularity with such a large electorate—almost as easy, perhaps, as the promises made by the Opposition and certainly easier than the promises made by the Liberal and Social Democratic Members on the remote possibility that they could, or even would, deliver.
I have enormous respect for Nottingham's student population and I believe that they have a more practical grasp of the problems before us than many people are giving them credit for. Like most colleagues in this place, I have had much correspondence on the subject. Sadly, most of it has consisted of identical letters worked from a common draft. All too rarely—and, bearing in mind that we are discussing higher education, I think it is fair to say this — has a letter been about the needs and problems of the student writing. What makes it even worse—and I think that this should be pointed out—is that one of those letters that I received this morning reads as follows:
Dear MP,
I note with great concern …
I urge you to reject the Government's proposals which could mean that I will have to find another £800 a year to keep my child/children at University.
Clearly, if the person signing it does not know whether he or she has a child or children at university, I question whether the £800 a year is a fact either. In case the hon. Member for Leeds, Central (Mr. Fatchett) thinks that I am fooling, I am more than happy to lay this letter before the House. I believe that one of my colleagues on the Front Bench has had a similar pre-printed letter.
My understanding from the discussions I have had with many students in Nottingham indicates quite the reverse of the position described by the hon. Member for Liverpool, West Derby (Mr. Wareing), because it is the student coming from a very humble background who gets the full grant. That student is not the one who is harmed by these provisions; he is covered. Equally, it is true that the student who comes from an affluent household and whose parents are generous will manage.

Mr. Andrew F. Bennett: rose—

Mr. Brandon-Bravo: I am sorry; we are very short of time.
It is indeed the student who comes from a so-called middle-class family background and whose parents are not making the presumed parental contribution who seems to be in trouble under the present system. It was for that reason that I wrote to my right hon. Friend the Secretary of State over 12 months ago saying that in my view the


only way out of that problem was to have, on top of the basic grant system, a loan system that could be guaranteed in some way in order to ensure that all students, whether they came from a humble background or a very rich background, were not denied access to higher education.
It really amazes me that Opposition Members always have to presume that Conservative Members come from other than a humble background. I will not waste the time of the House replying to idiotic comments on these lines. I support the view that the generality of the welfare state, the DHSS, is not, and never was intended as, a primary source of student support. I do not say that it does not have a role, and I hope that the report to which my right hon. Friend the Secretary of State referred earlier will address itself to some of the problems that I know concern us all. I believe that student support should come from grants, loan, parental contribution, and vacation earnings.
The student body produced a list of what it wanted and it was clearly expensive. I believe that the total was about £500 million, and it may have been more. I have had to say to students—they have accepted the comment with good grace—that if I had £500 million to spend on education, I could produce a long shopping list of items on which I would want to spend the money in our universities and polytechnics before I increased maintenance grants to students. I realise that I am representing a highly marginal parliamentary seat and I have already told the hon. Member for Leeds, Central (Mr. Fatchett) that I am prepared to stand my ground. I would rather be honest than go for the flannel that comes from Opposition Members.
Liberal Members complain about the loss of transport cost provision and imagine that all students were against its withdrawal. I shall quote from one of the letters that I received from a student body on that issue. It reads:
the majority … will be better off with a flat rate of £100",
which was the decision at that time. The letter continues:
Even under the old system it was not possible to be able to claim daily travel unless you lived outside a three mile radius from the university … Although the new system will mean rough justice for some, it will not be open to the flagrant abuse of the old system".
Apparently, the Liberal party wants to return to the flagrant abuse of the old system.
Under the changes that are being proposed, benefits will not be given during short vacations. If a student returns home for Christmas, he surely cannot claim to be unemployed over the Christmas period. The long vacation is different and I understand that provision will continue to be made. I understand also that there are some students who will be forced to pay rent for their accommodation when they return to their home base. Those students will undoubtedly have a problem, and I hope that my right hon. and hon. Friends on the Treasury Front Bench will consider that most carefully. I would not wish to find students unable to return to their universities because their accommodation had been let.
With so large a student body in my constituency it would be convenient for me to criticise the Government, but given the generality of the financial constraints that we are facing, I believe that they are being extremely fair. On that ground I am happy to join my colleagues in supporting the Government.

Mr. Patrick Thompson: I am grateful to have the opportunity to speak briefly on student support. I have calculated that I have precisely six minutes in which to make my contribution and I shall try to get as much into that time as I can.
I am happy to support the Government's amendment because I believe that it recognises the realities which any Government would have to face. Throughout the debate the Opposition have been courting popularity in various ways. Indeed, they have admitted that openly during the past few minutes.
Education and training are the keys to our future, and they must have priority. I have regular discussions with students who live in my constituency and I have great respect for the work that they are doing at the university of East Anglia. Like hon. Members on both sides of the House, I have an understanding of the problems that they face.
The Government are right to be wary of the indiscriminate call for extra resources. I am sure my right hon. and hon. Friends on the Front Bench will not be shaken by the gloomy alliance between vice-chancellors and student union representatives. Only the other day the newsletter published by the university of East Anglia contained a joint statement issued to parents, signed by the acting vice-chancellor and the president of the students union, which said:
the measures proposed by the Government are going to face you with impossible choices. The student support system in this country is now grinding to a halt.
Without doubt, problems exist for students, but however great they are, if that is not an overstatement, nothing is. I do not think it helps the cause of higher education for any of us to go over the top about it.
We must think about priorities. When we are talking about student support, it is not good enough, as university teachers and students often do, to say that we want more money for this, that or the other. With finite resources we have to make a choice between money for student support, money for teaching salaries, and facilities, and money for research. Many students tell me that they are not happy with the quality of their lecturing, and members of staff at the university of East Anglia have told me, rightly, that they need more funding for research. I hope that the Government will make it clear what the priorities are for higher education and what their policy is before they deal with funding.
What I want to drive home is that we must decide on future policy for universities before responding to calls for more funding. Yes, I believe in a higher priority for education, but I also believe that we must consider what our universities are for, and whether we want universal entry to universities, which many Opposition Members call for, or whether we want centres of academic excellence with high quality research, which many university staff call for. Those are hard choices which neither the Government nor the Opposition can escape. All too few hon. Members have addressed the matter of choice and priorities.
In regard to student morale and motivation, I am one of those hon. Members who are sorry that the Government have deferred the review of the student grant system. Indeed, I still think it worth while to consider at least a partial loan system. We could have tackled the problems head on by examining the whole system of student support


rather than reacting, as we are now, to the mail which we are getting from so many unhappy students and their parents. We must consider thoroughly the whole question of student support. I support my hon. Friends who have suggested that in the debate.
We are used to being lobbied by the National Union of Students. Some of the lobbying is sensible, and some not so sensible. I am particularly unhappy about the way in which over the years students unions have been politicised. It is a sad fact with which we have to live but it is not doing the universities any good. The recent scenes of disorder in many universities have not helped their cause. Therefore, it is particularly sad that today in the university of East Anglia intolerance has reared its head yet again, with the National Union of Students saying that it intends to withdraw support and funds from the Conservative association in the university. That is just the sort of thing that does not help those of us who support the cause of higher education. My constituents know that I am fighting for education, but I am not helped by the attitudes that are, unfortunately, all too often displayed. The Opposition offer £24 billion of spending—much of it on education—yet that will solve nothing because they are not addressing the priorities. We must decide what those priorities are and consider the future of higher education clearly and sensibly.
I support the amendment.

Mr. Gerald Bowden: For the 12 years immediately before entering the House in 1983 I was a lecturer at a polytechnic not very far away. During that time I came to know many students, with many of whom I am still in close contact. The views ascribed to students by Opposition Members do not wholly accord with my experience of student feelings. The students came from varied backgrounds, and part of my job was to try to encourage those whose families did not have any experience of higher education and to show them that there was something for them in higher education within that polytechnic.
There were very few elitist courses such as the hon. Member for Durham, North (Mr. Radice), my right hon. Friend the Secretary of State and I shared at the same institution of higher education. There were several day-release courses. Students worked for four days a week and were released to study for one. That needed great motivation, because they needed to study for about six years before they obtained their degrees. They had both the motivation and the maturity. As a result of working with students of that calibre, others gained the ability to see that there was work to be done and that there were ways of supporting themselves other than solely on a state grant.
I was most involved with a "thick sandwich" course. The students were in college for two years and then spent the next year gaining work experience in a professional firm, returning to college for a fourth year. There is no doubt that that year's work experience gave them a new approach to their studies. There is every advantage in having a diversity of funding and of student support instead of a straight handout from the taxpayer or ratepayer.
I have no hesitation in saying that the proposals being put forward are a step in the right direction towards finding that diversity of support, and I welcome what the Government are doing.

Mr. Stan Thorne: I wish to make a few brief points that have not yet perhaps been raised. I shall concentrate on mature students. In common with many others, I have lost jobs. In 1966 I lost a job, and at the age of 48 I undertook four years' full-time study at a university. As a result, my wife and two children went through a very difficult period. That was in 1966, but things must be much worse today for many of those who have been made unemployed and who would like to go back to school to equip themselves for other things.
Students are often young people and we should give them a full opportunity to educate themselves without any hardship. However, hon. Members should also bear in mind mature students. I believe that hundreds and thousands of married men with children would return to full-time education as long as they did not have to inflict additional hardship on their families and children. That is a brief but important point to bear in mind when considering the education of our people.

Mrs. Margaret Beckett: In the Green Paper on social security the Government said that they believed that it was right in principle to return to the situation which had existed before 1966, in other words, to dependence for students on grants; in the subsequent White Paper, they said that they remained committed to the aim of removing students from dependence on social security benefits. We could all, in a sense, support that aim, that students should be dependent on grants rather than on benefits, but this depends on the grants being sufficient for students to sustain a reasonable standard of living and to study.
The Government seem to have drawn substantially on the comments of the housing benefit review, which suggested that there should be an option of excluding students from housing assistance, without going on to read to the end of the paragraph where the review team said:
We do not underestimate the effects of this; it would require complete overhaul of the student grant provision for housing costs.
This is precisely what the Government have not provided. Apart from the fact that the Government have failed to provide what the review team saw as a prerequisite for the kind of change to be introduced, the changes are being made, in higher education as elsewhere, against a background of cuts.
The Secretary of State was kind enough to say in his opening remarks that he recognised the anxiety among the student population. From other remarks that he has made, it seems that the Secretary of State may not be aware that there is not only anxiety but debts in the student population —substantial debts, even now, before the cuts that we are debating tonight. The anxiety which already exists is fuelled by the Government's overall record in higher education support. The Secretary of State described a situation in which there should be a balance of support for students, some coming from their parents, some from the state or perhaps, on occasion, even from the earnings of the students themselves.
Unfortunately, however, that balance has already shifted substantially. The level of assessed parental contributions increased from £84 million in 1979–80 to £230 million last year. In cash terms, that is an increase of some 270 per cent. or, in real terms, as has already been identified this evening, some 70 per cent. It is, in any case, a substantial shift in the burden away from the state towards parents.
I noted that the hon. Member for Staffordshire, South (Mr. Cormack) asked his right hon. Friend about some comments that he thought he had heard about the long-term phasing out of the parental contribution, and based his question to the Secretary of State on the premise that, of course, at 18 individuals were adults. It is rather unfortunate that elsewhere, in the Social Security Bill, a fact which the hon. Member for Staffordshire, South may not have observed, the Government make it very plain that at 18 one is not an adult and that, until they are 25, people will receive a lower rate of benefit. That ties in with the way in which, for students, they have moved the contribution towards the parental side.
The Secretary of State also referred to the potential for support from student earnings, but these days it is much more difficult for students to supplement their financial support from earnings. As I understand it, the Department of Employment's figures show that between 1979 and 1985 the proportion of students unemployed in the long vacation rose to 70 per cent. There are figures to show that, no matter what region is surveyed, the extent of student unemployment in both the long and the short vacations is unprecedented in recent years. Here again, it appears that students cannot look for the support that the Secretary of State implies. In fact, although the Department of Education and Science implies that it expects students to support themselves from their earnings, the Department of Health and Social Security puts all its emphasis on their not having earnings and on their being available for work if they are to be able to claim benefit.
In this context, one of the more unfortunate effects of the proposals is that some students will lose their entitlement to unemployment benefit. The Secretary of State says that students can supplement their income from earnings, either as mature students before they go to university or during the vacations. However, one of the side effects of student earnings is that students may have built up an entitlement to unemployment benefit. However, even if they have built up an entitlement to unemployment benefit that is sufficient to meet the additional condition that students have to fulfil in order to draw such benefit in the short vacations, their entitlement, for which they have paid, will be removed by these proposals.
Apart from the shift of the contribution from the state towards parents, there have been other changes and cuts. The minimum award has been abolished. It was worth £410 in 1982–83. It was halved by 1983–84. Then it was abolished altogether. As the hon. Member for Cambridgeshire, North-East (Mr. Freud) said, changes have also been made to the travel grant. The hon. Member for Nottingham, South (Mr. Brandon-Bravo) suggested that some of the students who attend the university in his constituency may not have been troubled by this abolition.

I have received letters from constituents who attended colleges or universities all over the country in which they say that they suffered from that change.
The hon. Member for Cambridgeshire, North-East asked the Secretary of State to be honest. The whole history of the Government's policy in this, as in so many respects, is not one of honesty but of a rather shoddy and undercover set of shifts and compromises. My hon. Friend the Member for Durham, North (Mr. Radice) referred to the cuts in support from public funds and to the way in which the Committee of Vice-Chancellors and Principals and others have drawn attention to the serious consequences for students. They are serious indeed when one hears that the grant has dropped by 20 per cent. since 1979.
The Government appear to be claiming that part of the problem is that students are making increased claims on housing benefit. Of course, 90 per cent. of the savings that the Government are hoping to make will come from housing benefit. The Government say that these claims show that students are too dependent on benefit. But if students are too dependent on benefit it is because of the tremendous increase in costs, particularly in housing costs. It is because students need these additional resources that they have been forced to claim benefit. Heaven knows, the Government have done everything they can to reduce the generosity of the housing benefit scheme year by year. It is not only students as individuals but the whole community in which they live who until now, and also in the future, will be impoverished by the increased poverty among students. To suggest that £36 will be adequate compensation for the loss, in total, of between £20 million and £25 million in student support is insulting, even if all students were to receive compensation, which they will not.
Accommodation costs have risen by between 68 per cent. and 73 per cent. in the university sector. The Government's answer to that is to say that they will cut the entitlement to benefit and that instead they will give £36 to students. However, students who are without grants will not receive £36. As we read the Government's proposals, a number of groups of students are to be credited with the same resources as grant-aided students, but because they are not receiving grants they will be affected by the reductions in benefit. Any housing benefit claim that they may make will be subject to the special student deduction. We understand that even the partner of a claimant who is not a grant-aided student will be affected by such deductions; because they are not grant-aided they will not receive even the paltry £36 that the Government have proposed.
In this respect, the Government's policy approach seems to be that students should be supported from public funds so that they will not be entitled to benefit, even if they are not supported from public funds. The Secretary of State may be able to see the logic in that, but the Opposition cannot see it.
Students on discretionary awards in particular may be hit. The National Union of Students has produced figures for the losses that students are likely to face. A London student who is resident throughout the year in his own accommodation will lose about £209 a year. Students who go home during the vacation will lose about £150 in an academic year, and £514 or more in a full year, particularly because they are likely to face the loss of housing benefit in the long vacation. Even students out of


London face losses of about £300. Those are substantial sums for groups whose grants have been reduced by 20 per cent.
Will the Government tell the House the time scale of the future changes? The Secretary of State made it clear that, irrespective of whether students will be compensated by the Department of Education and Science, they will lose entitlement to benefit from the Department of Health and Social Security in the medium to long term. He said that we could not expect to decide tonight exactly what compensation was appropriate because we were waiting for the report of the Social Security Advisory Committee. If that is so, why are the changes in housing benefit during the vacation to take effect in June? We are not waiting very long, are we? We already know the date for that, although the report is not even written, never mind before the House. If June 1986 is, to be charitable, the short term, what is the medium term for the complete removal of benefit? Is it October 1986, December 1986, or January 1987?
There is no question but that the Government are, in effect, and probably by design, introducing loans by the back door. The British Medical Association has written to us, drawing our attention to the whole range of problems that medical students face, particularly in central London, which are coming to a peak in the sense that students are facing loans of about 20 per cent. of income. In other words, they must now make up from loans what the Government have withdrawn in benefit. One wonders how they are to manage.
The Secretary of State made a remarkable statement when he said that there is no reason for the Government to impose severe cuts which are beyond the means of students to meet. We agree, and hope that the Minister will tell us why the Government are doing that. In view of the Secretary of State's remarks, we expect to see him with us in the Lobby tonight.

The Minister for Social Security (Mr. Tony Newton): I am never sure what the rules of the House require about declaring direct personal interests as distinct from commercial interests. Perhaps I should tell the House that I have a daughter who expects to go to university this autumn, and another daughter who expects to go the following autumn. Therefore, I can be seen to have a direct interest.
Perhaps I should begin by restating briefly the Government's general position, which is that in the long run it is not sensible that students should be subject to two separate but intertwined systems of support. It has been clear from tonight's debate that that view does not necessarily depend on sharing the precise view about the right balance between grants, parental support and vacation earnings which the Government have put forward in the Green and White Papers. It is necessary to accept only that it cannot be satisfactory as a deliberate and permanent arrangement for students to be wholly or partly dependent on a system, which is primarily designed for those who, for various reasons, cannot work, rather than for those who have withdrawn voluntarily from the labour market to study, and which is not and cannot be sensibly equipped to make judgments about for whom and for what courses studies should appropriately be supported by the community.

Mr. Wareing: Will the Minister give way?

Mr. Newton: I shall not give way because the hon. Gentleman made a constructive point, and I have little time.
The hon. Member for Derby, South (Mrs. Beckett) and, implicitly, the hon. Member for Durham, North (Mr. Radice) acknowledged that the basic proposition that it would be better if student support and social security were separate was not one from which they would dissent. I accept that they expressed considerable and strong reservations about the particular policy proposals before the Social Security Advisory Committee. That view would be shared by many of my hon. Friends who have spoken, including my hon. Friend the Member for Nottingham, South (Mr. Brandon-Bravo), and certainly my hon. Friend the Member for Cambridge (Mr. Rhodes James), who made a most thoughtful speech to which my right hon. Friend the Secretary of State will pay careful attention.
Having said that, let me make it clear that our belief that it would be right to work towards a position in which the systems of student support and social security are once again separated out is, as we have repeatedly said, a long-term aim and not a current proposal.
That brings me directly to the points that the hon. Member for Derby, South made in her closing speech.

Mr. Andrew F. Bennett: When?

Mr. Newton: I shall come to that in a moment.
Despite what we have said from the outset about what our current proposals do not do, they have been widely and persistently misrepresented, as my hon. Friends have found from much of the correspondence that they have received. The most recent and notable example that I have seen was in The Times last Saturday, 8 March, in its section on family money. Among numerous inaccuracies—I shall quote only the most sweeping and glaring—it said:
All students will lose all benefits by academic year 1987–88.
From that basis it went on to make suggestions of potential losses of £1,100 in London and £840 elsewhere. There is no foundation for that statement whatever.
The specific proposals on which we have been consulting do not affect students' entitlement to supplementary benefit if they cannot find work in the long vacation, which is far and away the biggest element in the social security help which students receive. Nor do they affect any entitlement that there may be to unemployment benefit in the long vacation. Nor, as I told the hon. Member for Leeds, Central (Mr. Fatchett) do they remove the right to claim housing benefit in respect of privately rented accommodation in which students live at any time during the year.
Any major specific proposal on those matters would require further consideration within Government involving both the grant and the social security systems. They would require further consultation with the Social Security Advisory Committee, and, if they affected housing benefits, with the local authority associations. They would require fresh regulations to be brought before the House, and, as my right hon. Friend the Secretary of State has made clear, such proposals are not an immediate prospect. Nor—I wish it to be clear—will they be found in the Social Security Bill.
The hon. Member for Denton and Reddish (Mr. Bennett) asked me to say when, and I have no doubt that many of my hon. Friends would wish me to make that clear


as well. The public expenditure plans in the recent White Paper covering the three years 1986–87 to 1988–89 include continued provision for social security benefits for students on the basis only of the limited changes in the current consultative proposals. Having, I hope, made that clear, let me deal with the limited and specific proposals themselves.
The first point, which gives further emphasis to what I have just said, is that the proposals concern only a relatively small part of the current social security entitlement of students. Taken together they would affect some £40 million to £45 million of social security expenditure. Of that, £10 million to £11 million would go directly back into making one aspect of the housing benefit rules more favourable. So the net reduction in social security would be of the order of £30 million to £35 million. Of that, £10 million or £11 million would go back in the proposed £36 a year grant increase to students living away from home which is over and above the general grant increase announced by my right hon. Friend the Secretary of State for Education and Science.
The net overall saving for the budget for social security benefits is therefore between £20 million and £25 million and that may be compared with present benefit expenditure on students of around £120 million. I hope that that puts the nature of the proposals in perspective.

Mr. Nicholas Winterton: If the SSAC reports examples of hardship to students, will my hon. Friend consider introducing some form of amending legislation so that students do not lose overall the cash they are receiving at present?

Mr. Newton: I am happy to assure my hon. Friend that they are consultative proposals on draft regulations, that we shall consider the results of the consultation constructively, and that we shall take into account the points made by my hon. Friends and other hon. Members during the debate. However, we shall also consider them against the background of a student grants system which is one of the most generous in the Western world and of the recognition that the bills must be paid and student benefits weighed against the claims of pensioners and many others in the community.
I invite the House to reject the motion.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 193, Noes 258.

Division No. 101]
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AYES


Abse, Leo
Beith, A. J.


Alton, David
Bell, Stuart


Anderson, Donald
Bennett, A. (Dent'n &amp; Red'sh)


Archer, Rt Hon Peter
Bidwell, Sydney


Ashdown, Paddy
Blair, Anthony


Ashley, Rt Hon Jack
Boothroyd, Miss Betty


Atkinson, N. (Tottenham)
Boyes, Roland


Bagier, Gordon A. T.
Brown, Gordon (D'f'mline E)


Banks, Tony (Newham NW)
Brown, Hugh D. (Provan)


Barnett, Guy
Brown, N. (N'c'tie-u-Tyne E)


Barron, Kevin
Brown, R. (N'c'tle-u-Tyne N)


Beckett, Mrs Margaret
Bruce, Malcolm





Buchan, Norman
Kirkwood, Archy


Caborn, Richard
Lamond, James


Campbell, Ian
Leadbitter, Ted


Campbell-Savours, Dale
Lewis, Terence (Worsley)


Canavan, Dennis
Litherland, Robert


Carlile, Alexander (Montg'y)
Lloyd, Tony (Stretford)


Carter-Jones, Lewis
Lofthouse, Geoffrey


Cartwright, John
Loyden, Edward


Clark, Dr David (S Shields)
McCartney, Hugh


Clarke, Thomas
McDonald, Dr Oonagh


Clay, Robert
McKelvey, William


Clelland, David Gordon
MacKenzie, Rt Hon Gregor


Clwyd, Mrs Ann
Maclennan, Robert


Cohen, Harry
McNamara, Kevin


Conlan, Bernard
McTaggart, Robert


Cook, Robin F. (Livingston)
Madden, Max


Corbett, Robin
Mallon, Seamus


Corbyn, Jeremy
Marek, Dr John


Cox, Thomas (Tooting)
Marshall, David (Shettleston)


Craigen, J. M.
Martin, Michael


Crowther, Stan
Mason, Rt Hon Roy


Cunliffe, Lawrence
Maxton, John


Cunningham, Dr John
Maynard, Miss Joan


Dalyell, Tarn
Meacher, Michael


Davies, Rt Hon Denzil (L'lli)
Meadowcroft, Michael


Davies, Ronald (Caerphilly)
Michie, William


Davis, Terry (B ham, H'ge H'l)
Mikardo, Ian


Deakins, Eric
Millan, Rt Hon Bruce


Dewar, Donald
Miller, Dr M. S. (E Kilbride)


Dixon, Donald
Mitchell, Austin (G't Grimsby)


Dormand, Jack
Morris, Rt Hon A. (W'shawe)


Dubs, Alfred
Morris, Rt Hon J. (Aberavon)


Duffy, A. E. P.
Oakes, Rt Hon Gordon


Dunwoody, Hon Mrs G.
O'Brien, William


Eastham, Ken
O'Neill, Martin


Edwards, Bob (W'h'mpt'n SE)
Orme, Rt Hon Stanley


Evans, John (St. Helens N)
Owen, Rt Hon Dr David


Ewing, Harry
Park, George


Fatchett, Derek
Parry, Robert


Faulds, Andrew
Pavitt, Laurie


Field, Frank (Birkenhead)
Pendry, Tom


Fields, T. (L'pool Broad Gn)
Penhaligon, David


Fisher, Mark
Pike, Peter


Flannery, Martin
Powell, Raymond (Ogmore)


Foot, Rt Hon Michael
Radice, Giles


Forrester, John
Redmond, Martin


Foster, Derek
Rees, Rt Hon M. (Leeds S)


Foulkes, George
Richardson, Ms Jo


Fraser, J. (Norwood)
Robertson, George


Freeson, Rt Hon Reginald
Robinson, G. (Coventry NW)


Freud, Clement
Rogers, Allan


Garrett, W. E.
Rooker, J. W.


Glyn, Dr Alan
Ross, Ernest (Dundee W)


Godman, Dr Norman
Ross, Stephen (Isle of Wight)


Gould, Bryan
Rowlands, Ted


Gourlay, Harry
Sedgemore, Brian


Hamilton, James (M'well N)
Sheerman, Barry


Hamilton, W. W. (Fife Central)
Sheldon, Rt Hon R.


Harman, Ms Harriet
Shore, Rt Hon Peter


Harrison, Rt Hon Walter
Silkin, Rt Hon J.


Hart, Rt Hon Dame Judith
Skinner, Dennis


Haynes, Frank
Smith, C.(Isl'ton S &amp; F'bury)


Healey, Rt Hon Denis
Smith, Cyril (Rochdale)


Heffer, Eric S.
Smith, Rt Hon J. (M'ds E)


Hogg, N. (C'nauld &amp; Kilsyth)
Snape, Peter


Holland, Stuart (Vauxhall)
Soley, Clive


Home Robertson, John
Steel, Rt Hon David


Howell, Rt Hon D. (S'heath)
Stewart, Rt Hon D. (W Isles)


Howells, Geraint
Stott, Roger


Hoyle, Douglas
Strang, Gavin


Hughes, Robert (Aberdeen N)
Straw, Jack


Hughes, Sean (Knowsley S)
Thomas, Dafydd (Merioneth)


Janner, Hon Greville
Thomas, Dr R. (Carmarthen)


Jenkins, Rt Hon Roy (Hillh'd)
Thompson, J. (Wansbeck)


John, Brynmor
Thorne, Stan (Preston)


Johnston, Sir Russell
Tinn, James


Jones, Barry (Alyn &amp; Deeside)
Torney, Tom


Kaufman, Rt Hon Gerald
Wainwright, R.


Kennedy, Charles
Wallace, James


Kilroy-Silk, Robert
Wardell, Gareth (Gower)






Wareing, Robert
Wrigglesworth, Ian


Weetch, Ken
Young, David (Bolton SE)


Welsh, Michael



White, James
Tellers for the Ayes:


Wigley, Dafydd
Mr. Allen McKay and


Wilson, Gordon
Mr. Allen Adams.


Winnick, David





NOES


Adley, Robert
Eggar, Tim


Aitken, Jonathan
Emery, Sir Peter


Alison, Rt Hon Michael
Evennett, David


Ancram, Michael
Eyre, Sir Reginald


Arnold, Tom
Fairbairn, Nicholas


Ashby, David
Fallon, Michael


Aspinwall, Jack
Farr, Sir John


Atkins, Robert (South Ribble)
Favell, Anthony


Atkinson, David (B'm'th E)
Fletcher, Alexander


Baker, Nicholas (Dorset N)
Fookes, Miss Janet


Baldry, Tony
Forman, Nigel


Banks, Robert (Harrogate)
Forsyth, Michael (Stirling)


Bellingham, Henry
Fowler, Rt Hon Norman


Bendall, Vivian
Fox, Marcus


Benyon, William
Franks, Cecil


Bevan, David Gilroy
Fraser, Peter (Angus East)


Biffen, Rt Hon John
Freeman, Roger


Biggs-Davison, Sir John
Fry, Peter


Blaker, Rt Hon Sir Peter
Gale, Roger


Body, Sir Richard
Galley, Roy


Bonsor, Sir Nicholas
Gardiner, George (Reigate)


Boscawen, Hon Robert
Gardner, Sir Edward (Fylde)


Bottomley, Peter
Garel-Jones, Tristan


Bottomley, Mrs Virginia
Glyn, Dr Alan


Bowden, A. (Brighton K'to'n)
Gorst, John


Bowden, Gerald (Dulwich)
Gow, Ian


Boyson, Dr Rhodes
Gower, Sir Raymond


Braine, Rt Hon Sir Bernard
Greenway, Harry


Brandon-Bravo, Martin
Griffiths, Sir Eldon


Bright, Graham
Griffiths, Peter (Portsm'th N)


Brinton, Tim
Grist, Ian


Brittan, Rt Hon Leon
Ground, Patrick


Brooke, Hon Peter
Grylls, Michael


Brown, M. (Brigg &amp; Cl'thpes)
Gummer, Rt Hon John S


Bruinvels, Peter
Hamilton, Hon A. (Epsom)


Bryan, Sir Paul
Hamilton, Neil (Tatton)


Buchanan-Smith, Rt Hon A.
Hargreaves, Kenneth


Buck, Sir Antony
Harris, David


Budgen, Nick
Harvey, Robert


Burt, Alistair
Haselhurst, Alan


Butcher, John
Hawkins, C. (High Peak)


Butler, Rt Hon Sir Adam
Hawksley, Warren


Butterfill, John
Hayes, J.


Carlisle, John (Luton N)
Hayhoe, Rt Hon Barney


Carlisle, Kenneth (Lincoln)
Hayward, Robert


Carlisle, Rt Hon M. (W'ton S)
Heathcoat-Amory, David


Carttiss, Michael
Heddle, John


Cash, William
Henderson, Barry


Chalker, Mrs Lynda
Hickmet, Richard


Channon, Rt Hon Paul
Higgins, Rt Hon Terence L.


Chapman, Sydney
Hirst, Michael


Clark, Hon A. (Plym'th S'n)
Hogg, Hon Douglas (Gr'th'm)


Clark, Dr Michael (Rochford)
Holland, Sir Philip (Gedling)


Clark, Sir W. (Croydon S)
Holt, Richard


Clarke, Rt Hon K. (Rushcliffe)
Howard, Michael


Colvin, Michael
Howarth, Alan (Stratf'd-on-A)


Conway, Derek
Howell, Rt Hon D. (G'ldford)


Coombs, Simon
Howell, Ralph (Norfolk, N)


Cope, John
Hubbard-Miles, Peter


Couchman, James
Hunt, David (Wirral W)


Critchley, Julian
Hunt, John (Ravensbourne)


Crouch, David
Hunter, Andrew


Currie, Mrs Edwina
Hurd, Rt Hon Douglas


Dickens, Geoffrey
Jessel, Toby


Dicks, Terry
Jones, Gwilym (Cardiff N)


Dorrell, Stephen
Jones, Robert (Herts W)


Douglas-Hamilton, Lord J.
Joseph, Rt Hon Sir Keith


Dover, Den
Kellett-Bowman, Mrs Elaine


du Cann, Rt Hon Sir Edward
Kershaw, Sir Anthony


Dunn, Robert
Key, Robert


Durant, Tony
King, Roger (B'ham N'field)





Knight, Greg (Derby N)
Spicer, Michael (S Worcs)


Knowles, Michael
Squire, Robin


Lamont, Norman
Stanbrook, Ivor


Lang, Ian
Stanley, Rt Hon John


Latham, Michael
Steen, Anthony


Lawler, Geoffrey
Stern, Michael


Lawrence, Ivan
Stevens, Lewis (Nuneaton)


Lee, John (Pendle)
Stewart, Allan (Eastwood)


Leigh, Edward (Gainsbor'gh)
Stewart, Andrew (Sherwood)


Lightbown, David
Stewart, Ian (Hertf'dshire N)


Lilley, Peter
Stokes, John


Lloyd, Ian (Havant)
Stradling Thomas, Sir John


Lloyd, Peter (Fareham)
Sumberg, David


MacKay, John (Argyll &amp; Bute)
Tapsell, Sir Peter


Maclean, David John
Taylor, John (Solihull)


Major, John
Taylor, Teddy (S'end E)


Malone, Gerald
Tebbit, Rt Hon Norman


Marland, Paul
Temple-Morris, Peter


Mather, Carol
Terlezki, Stefan


Maxwell-Hyslop, Robin
Thatcher, Rt Hon Mrs M.


Merchant, Piers
Thomas, Rt Hon Peter


Meyer, Sir Anthony
Thompson, Donald (Calder V)


Miscampbell, Norman
Thompson, Patrick (N'ich N)


Moate, Roger
Thornton, Malcolm


Morris, M. (N'hampton S)
Thurnham, Peter


Newton, Tony
Townend, John (Bridlington)


Nicholls, Patrick
Townsend, Cyril D. (B'heath)


Page, Richard (Herts SW)
Tracey, Richard


Parkinson, Rt Hon Cecil
Trippier, David


Parris, Matthew
Trotter, Neville


Pawsey, James
Twinn, Dr Ian


Portillo, Michael
van Straubenzee, Sir W.


Powell, William (Corby)
Vaughan, Sir Gerard


Powley, John
Waddington, David


Raison, Rt Hon Timothy
Wakeham, Rt Hon John


Rees, Rt Hon Peter (Dover)
Waldegrave, Hon William


Rhys Williams, Sir Brandon
Walden, George


Ridley, Rt Hon Nicholas
Walker, Bill (T'side N)


Rippon, Rt Hon Geoffrey
Wall, Sir Patrick


Roberts, Wyn (Conwy)
Waller, Gary


Robinson, Mark (N'port W)
Ward, John


Rossi, Sir Hugh
Wardle, C. (Bexhill)


Rumbold, Mrs Angela
Watson, John


Ryder, Richard
Wells, Bowen (Hertford)


Sackville, Hon Thomas
Wells, Sir John (Maidstone)


Sainsbury, Hon Timothy
Wheeler, John


Sayeed, Jonathan
Whitney, Raymond


Shaw, Giles (Pudsey)
Wiggin, Jerry


Shaw, Sir Michael (Scarb')
Wilkinson, John


Shepherd, Colin (Hereford)
Winterton, Mrs Ann


Shepherd, Richard (Aldridge)
Winterton, Nicholas


Shersby, Michael
Wolfson, Mark


Silvester, Fred
Wood, Timothy


Sims, Roger
Woodcock, Michael


Skeet, Sir Trevor
Yeo, Tim


Smith, Sir Dudley (Warwick)
Young, Sir George (Acton)


Soames, Hon Nicholas



Speller, Tony
Tellers for the Noes:


Spencer, Derek
Mr. Francis Maude and


Spicer, Jim (Dorset W)
Mr. Mark Lennox-Boyd

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 33 (Questions on amendments), and agreed to.

MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved,
That this House recognises that more students than ever before are receiving higher education; appreciates the need to hold increases in student grant rates to levels which the country can afford; welcomes the Government's current efforts to rationalise and simplify some aspects of the provisions of the social security system as it affects students; and notes that the Secretary of State for Social Services expects shortly to receive the advice of the Social Security Advisory Committee on his proposals to this end.

Fulham By-election

Mr. Clement Freud: On a point of order, Mr. Speaker. During the Division in the Aye Lobby, an hon. Member held up a notice which read, "Your help is urgently required at the Fulham by-election". Is it in order for an untruthful notice to be displayed? When I offered my help, it was refused. Secondly, is there any limit to the advertising that one might carry out? My daughter needs a British car with low mileage. I wonder whether it would be in order if I held up a notice to that effect during the next Division.

Mr. Speaker: I thought that the hon. Gentleman said that he would raise a genuine point of order. I am not certain that his point of order is all that genuine, but it has the ring of truth about it.

Mr. Richard Hickmet: Further to that point of order, Mr. Speaker. Would it not be in order to make the point that the Liberal party in Fulham needs all the help that it can get?

Mr. Speaker: I think that we should proceed with the next debate.

European Community (Coal and Steel)

The Minister of State, Department of Trade and Industry (Mr. Peter Morrison): I beg to move,
That this House takes note of European Community Documents Nos. 8293/85, a communication by the Commission to the Council concerning the organisation of the steel market after 1985; 9300/85, a communication by the Commission to the Council on the introduction of a system of production quotas under Article 58 of the Treaty establishing the European Coal and Steel Community after December 1985; 9301/85, a communication by the Commission to the Council concerning rules on aid and financial transfers to the Community Steel Industry after 1985; 8779/85, proposals for Council Decisions concerning contributions to the European Communities to finance measures connected with the restructuring of the coal and steel industries; 5194/84, a communication by the Commission to the Council on the General Objectives for Steel 1985; and 4493/86, a proposal by the Commission for a Council Regulation establishing quantitive restrictions on imports of certain products orginating in the United States of America; and welcomes the agreement by the Government in the Council of Ministers to a further limited period of European Coal and Steel Community market organisation measures beneficial to the United Kingdom, and to the ending of most forms of state aids to the Community steel industry.
The purpose of the debate is to take note of the seven European Community documents relating to the steel industry as recommended by the Select Committee on European Legislation. I apologise to the House for the fact that it has proved necessary to agree to the adoption of two of the documents in Brussels before a debate could be arranged.
I informed the hon. Member for Newham, South (Mr. Spearing) about the October measures at the time and subsequently explained the reasons for my decision in my written replies on 11 November and 16 December 1985. My right hon. Friend the Secretary of State wrote to the hon. Member for Newham, South on 24 January about the Community retaliation measures against the United States. I should like to thank the hon. Gentleman for the understanding of his Committee in the special circumstances which I have explained. I assure him and his colleagues on the Committee that I was and am concerned to respect the resolution of the House of 30 October 1980.
The House last debated the international aspects of the steel industry in November 1983. Since then, a good deal of progress has been made towards solving the problems of overcapacity and weak markets, although much still remains to be done. Demand for steel in the Community in 1985 was about 4 per cent. higher than the depressed levels of 1983. Output has therefore risen and firmer prices have been possible. Coupled with major reductions in costs, this in turn has allowed steel firms both in the United Kingdom and in the Community generally to reduce losses or to move into profit.
The British Steel Corporation, having made £21 million of profit in the first half of this financial year, expects to be in profit for 1985–86 as a whole—the first overall profit it will have recorded since 1974. I hope that all hon. Members will agree that this is a major achievement for all of those who have worked at BSC. I should like to take this opportunity to pay tribute in particular to Sir Robert Haslam, who is about to leave the chairmanship of BSC, for his leadership of the corporation during the past three years. He is to be succeeded by the present deputy

chairman, Mr. Bob Scholey, who has worked closely with Sir Robert and his predecessor to bring about the present improved performance.
The Government remain committed to further progress by the corporation towards sustained profitability. It has cost the taxpayer a great deal of money, and we want that dependence on the taxpayer to be left behind for good. The corporation expects to demonstrate that financial self-sufficiency can be achieved by the end of the present three-year plan.
Turning to the European scene, we can now see that the measures of the past five years have had an impact. Some 32 million tonnes of capacity have been closed since 1980, bringing the total down to about 140 million tonnes of hot rolled capacity. That achievement owes much to the Community regime on state aid. All Community members have contributed to this closure programme, contrary to what some hon. Members believe. The French have closed about 6 million tonnes of capacity, the Germans nearly 7 million tonnes and the Italians more than 5·5 million tonnes while the United Kingdom has closed just less than 5 million tonnes.
The document on general objectives for steel to 1985 has been superseded by a new document "General Objectives for Steel in 1990". In this new document the Commission estimates that steel production levels achieved in the Community in 1984—about 103 million tonnes of hot rolled products — are not likely to be exceeded between now and 1990, even if economic conditions are favourable. Production in 1990 is therefore estimated at 103 million tonnes on a best case assumption and 94 million tonnes on a worst case assumption. This picture of stable or declining steel output is reflected in all industrialised countries, and the United States and Japan face similar pressures.
Despite the closures that have already been made, the Commission concludes that an excess capacity of about 24 million tonnes still exists in the Community. Last October I attended two Council of Ministers meetings which discussed the Commission's proposals for the shape of the Community steel regime after 1985. As the House is aware, we have had for the last few years an elaborate system for production quotas and minimum prices to keep allowed supply in balance with demand. These largely succeeded in their objective of maintaining prices while excess capacity was cut out and the level of state aids cut back. The Commission proposes that this system should continue for a further three years because of the continued fragile nature of the steel market and the continued overhang of excess capacity.
The Commission also proposed the progressive liberalisation of the system to reflect the improvements now being seen in the market and designed to pave the way towards the return to a free market in 1988 or 1989. The Council of Ministers—

Mr. Teddy Taylor: Will my hon. Friend tell me what he means by a free market? Will he confirm that the Commission will retain the guidance prices system which will ensure that any importers will have to charge a certain price? When my hon. Friend speaks of a free market, does he mean that imports which are not dumped will be allowed in at their market price?

Mr. Morrison: A free market means what it says. I am sure that my hon. Friend will accept that it is important to make sure that it is free in every sense of the word—that there is fair competition at the same time.

Mr. Taylor: What does that mean?

Mr. Morrison: It means precisely what it says. It is important to ensure that there are no hidden subsidies, because if there were such subsidies it would not be the free market which I hope my hon. Friend and I would want it to be.

Mr. Taylor: Will the guidance pricing system continue to operate?

Mr. Morrison: My hon. Friend will understand that it is a little early to say. We are speaking about two or three years hence and there will be significant negotiations and developments which will take place between now and then. I have listened carefully to what my hon. Friend says, and I have absolutely no doubt that he will keep me closely up to the mark on this issue as the situation develops.

Mr. Richard Hickmet: Whether there is a price guidance regime or not, will my hon. Friend accept that, with respect to European steel producers, the British Steel Corporation is best placed to produce steel competitively and cheaply and to succeed in every competitive free market which may be established following the phasing out of the quota regime?

Mr. Morrison: I agree with my hon. Friend. I know that he has a close interest in BSC and watches carefully what it does. I think that the achievements of BSC so far have been remarkable. It has made itself into a viable and competitive industry after starting, some 10 years ago, from a low base. I entirely accept what my hon. Friend says.

Mr. Stan Crowther: Is the Minister giving the House a cast-iron assurance that the hidden subsidies which have operated for years in West Germany, for example, in the subsidisation of coking coal and of freight-rail transport, will be ended? It has been impossible to give such an assurance in the past.

Mr. Morrison: The assurance that I can give the hon. Gentleman is that nobody is keener than me, and during my time at the Department of Trade and Industry nobody has been keener than me, to rifle out unfair competition. I will chase it for all I am worth. If the hon. Gentleman or any other hon. Member has any specific evidence which he thinks may not be available to me, I hope that they will come to me fast and give me that evidence. I will take the appropriate action. I feel strongly that competition should be free and fair. The two go together. I hope that the hon. Gentleman will take me up on that as and when he has specific examples which I may put to the Commission so that it can do its job and rifle them out.
On 29 October, the Council of Ministers agreed to the Commission's proposals with some modification. The Council agreed to the suspension of the minimum price system, but it took a more cautious view than the Commission on the appropriate pace for liberalisation of the quota system. Only coated sheet and reinforcing bar were liberalised at the start of 1986, although the Commission may make proposals for further liberalisation in 1987. These are early days, but the initial moves do not

seem to have led to any serious price weakness in the liberalised categories. We shall keep a close watch on developments this year and in the future.

Mr. Ian Wrigglesworth: Before the Minister leaves the question of excess capacity of 24 million tonnes which he mentioned, can he tell us what the Community is doing, as there is great anxiety about capacity in Third world countries such as Korea, where substantially increased capacity is being prepared or coming into production while we are apparently closing down capacity?

Mr. Morrison: The hon. Gentleman will appreciate that the Community watches these matters carefully, not least because it is important that there is a free market and fair trading. I am aware of the problems and will ensure that the Community is, too. I appreciate that the ramifications of what the hon. Gentleman said are potentially crucial to steel capacity and to employment in steel here and elsewhere in the Community.

Mr. Richard Caborn: Will the Minister give way?

Mr. Morrison: I am happy to go on giving way, but there is limited time for the debate and I want everyone else to have an opportunity to catch the Chair's eye.

Mr. Caborn: I am grateful to the Minister for giving way. At the meeting in Luxembourg on 29 October, was there any discussion about setting up an investigation into hidden subsidies, which my hon. Friend the Member for Rotherham (Mr. Crowther) mentioned? Which country initiated that move? Were the British supportive of setting up an investigation into hidden subsidies?

Mr. Morrison: The hon. Gentleman might have heard about that meeting. I arrived at 10 am, and the meeting did not finish until 3 am the following morning. He will appreciate that my recall will not be 100 per cent. accurate. I hesitate to say that I put in the point about watching matters carefully so that, if there were problems such as the hon. Gentleman mentioned, the Commission could operate immediately. I think that it was me, but I certainly supported it strongly when we discussed the matter at, I believe, 2 am. Hon. Members have my sympathy. More than that, I shall happily be nudged, goaded and a few other things by them to ensure that we achieve what they want. I hope that we can all agree on the general approach.
In October, the Commission also made proposals for the successor to the steel aids code, which expired at the end of 1985. For the next three years, the major forms of aid—operating aid, investment aid and regional aid—are banned. Aid for research and development and for environment protection will be allowed on broadly the same terms as for other industries. Limited closure aid is permitted, but only for redundancy payments or for firms leaving the steel industry altogether.
This restrictive approach to state aids should protect United Kingdom steel firms in both the public and private sectors against the threat of extensive subsidies to their continental competitors.
It is essential that other Community members do not try to block the further reduction in capacity that will be necessary to bring down the still substantial level of excess


capacity. Only if this is done are we likely to succeed in returning to a more normal free market in steel in two or three years' time.
It is sometimes suggested that the problems of the steel industry could be solved if only exports outside the Community were increased. As the Community's general objectives paper makes clear, the problem will be to keep net Community exports up to present levels, let alone achieve an increase.
Exports to the United States of America have been subject to greatly increased restrictions over the last year. As the House knows, the EC/US steel arrangement, which limits exports to the United States and dates back to 1982 was recently extended and modified; 33 steel products are now restricted as against the 10 originally covered in 1982.
The major problem we and the Community faced in negotiating the new agreement related to exports of semi-finished steel. We were concerned to protect a major new long-term export contract which BSC had negotiated with Tuscaloosa Steel. The result was that last December the United States gave assurances to Tuscaloosa which substantially safeguarded the corporation's interests. However, the overall level of exports which the United States could accept was not enough to satisfy the Community as a whole. As a result, the United States restricted imports unilaterally. In consequence, the Commission made further proposals for retaliation. These proposals, for quotas on the import from the United States of coated paper, bovine fats and fertilisers, were agreed by the Council of Ministers and were introduced on 15 February 1986.

Mr. Teddy Taylor: Could my hon. Friend tell us what reasons the United States gave for imposing these restrictions? Is it not the case that we had come to a voluntary agreement with the United States on a specific tonnage and had in fact greatly exceeded that?

Mr. Morrison: It is not for me to comment on the specific reasons which the United States might give. I might be able to muse about them, but I think that my hon. Friend will appreciate that it is not for me to comment on what motivation the United States Government might have for any move they make.
Following the counter-retaliation by the United States against the Community, which included what we believe to be wholly unjustifiable discrimination against other United Kingdom exports of semis, contacts are taking place between the Commission and the United States to explore the possible scope for a negotiated settlement of the dispute about semis. The United Kingdom would, of course, welcome such a settlement, provided that the corporation's Tuscaloosa sales were not impaired and that discrimination against other United Kingdom semis was removed.
I turn to the social measures set up to deal with the problems caused by the restructuring of the steel industry. Two of the documents to be debated tonight cover Commission proposals in this area, and from my personal experience, living as I do a mile away and having a constituency interest, I am fully aware of the serious hardship which is created by steel closures.
One document notes the continuing restructuring process in both the coal and steel industries in the Community and the consequent unemployment and social hardship. It concludes that the programme of special social

measures should continue. This involves payments to member states for schemes to finance early retirement and redundancy payments. In recent years, these measures have been financed by transfers from the general budget of the Communities to the European Coal and Steel Community, and the document recommends that this practice should continue.
There is no agreement at present among member states on the principle of these proposals, on the details, or indeed on the method and level of financing, and I will take careful note of any views expressed in the debate this evening.
The second document puts forward suggestions for stronger Community structural measures to assist steel areas. The Commission has proposed that there should be an integrated approach in a limited number of areas where losses in steel are most serious. The idea is that it might be possible to improve the effectiveness of Community and domestic resources by improving co-ordination. The Commission indicated that it intended to develop these proposals in consultation with the member states concerned and we stand ready to consider this further with the Commission.
I hope and trust that the House will welcome the support given by the Government for the measures taken by the Community towards the restoration of a free market in steel. We believe that the measures adopted last October provide a sound framework for the restoration of a viable and competitive steel industry in Britain and in western Europe generally. I commend the documents to the House.

Mr. Alan Williams: I do not intend to deal in detail with the individual documents, because I think that the essence of the package is that the Government have been sold a pup, and I do not think that they realise it yet. The only paper to which I shall refer is that which deals with sanctions against the United States. We, the Opposition, want to lend support to the action that has been taken in that regard.
When I consider the potential of the package of documents which is before us, I must warn the House that I regard the prospective impact on the steel industry as extremely serious, and possibly very damaging. The essence of the forward projection is that there is 25 million to 30 million tonnes of excess capacity in the industry in Europe. As we well know, and as we have often protested, over the past decade —a period when we have been cutting back on capacity — Italy, West Germany, Belgium and France have been building up capacity. They have been creating the surplus capacity problem and we have been carrying the cost and the cuts. After a decade of virtual attrition in the industry, West Germany has returned to the 40 million tonnes that it previously produced. It seems to be in a position to benefit from a shift in cuts from general capacity to hot-rolled capacity.

Mr. Hickmet: Does the right hon. Gentleman accept that over the five years since 1980 the Germans have cut capacity by nearly 7 million tonnes, the Italians by 5·5 million tonnes and the French by 6 million tonnes—these have been cuts from a similar level of that of the United Kingdom—and that United Kingdom cuts have amounted to less than 5 million tonnes? Where do these figures fit into the case that the right hon. Gentleman is presenting to the House, or does he not accept them?

Mr. Williams: The decade has to be taken as a whole if we are to see the true outturn. The Germans have been building up capacity—[Interruption.] I have no doubt that the hon. Gentleman will participate in the debate if he is fortunate enough—and we are unfortunate enough—to catch your eye, Mr. Deputy Speaker. I ask him to allow me to make my own speech while he is seated. If he wishes to intervene again and he rises to do so, I shall give way.

Mr. Teddy Taylor: Perhaps the right hon. Gentleman will agree that a helpful guide to hon. Members is the information that was published by the Department of Employment under one of its prominent Ministers, who has sinced moved to another Department. It shows that since 1979 the reductions in the numbers employed in steel in Britain have been double the average for the rest of the Common Market.

Mr. Williams: That is right. I shall be coming to figures for the decade, which show a similar pattern. I do not want to anticipate that part of my speech now.

Mr. Hickmet: rose—

Mr. Williams: The hon. Gentleman must remember that many hon. Members wish to contribute to the date. I have hardly done more than complete the first couple of sentences of my speech. I am glad, of course, to be followed so assiduously.
It is important that the Minister and the Government tell our EEC partners clearly and categorically that Britain has already had more than its share of cuts. If they are talking of further cuts in the next four or five years, tell them that they need not look in this direction. We have done more than our share. It has been suggested that as many as 80,000 jobs may go throughout the planning period. It would be interesting if the Minister would hazard a guess at the job loss in the United Kingdom under the cut in capacity that is intimated.
I fear the implications of the policy underlying the documents. At last the British Steel Corporation has become competitive with the rest of Europe and its great plants are now as efficient as those of any of its competitors throughout the EEC. Just as we can boast about that, the EEC is changing the rules, and, astonishingly, we are agreeing to that. As the Minister has indicated, there is no longer to be any direct as sistance. He put that as a defence of BSC's interests—a peculiar argument if one considers the pattern of assistance over recent years.
Document 9301 says:
Aid to cover operating losses and aid for investment, even under regional aid schemes and even where the aid would not help to expand capacity, will no longer be permitted.
That is clear; there will be no more direct aid. So BSC will have to compete without direct Government assistance.
What about indirect assistance? I raised that at Question Time earlier today. The Minister and his officials are well aware of a report by the National Economic Development Office.
On figures which are admitted to be slightly out of date and which are probably less unfavourable, whereas BSC receives an indirect subsidy of just over £1 a tonne, in Italy the subsidy is £6 a tonne, in West Germany it is £8 a tonne and in France it is £8·3 a tonne. Those are indirect subsidies which will still be available. BSC's continental competitors never received direct subsidies, but the

subsidy to our industry helped to counterbalance the concealed benefits which our continental rivals were getting.
Concurrent with our industry receiving no assistance while its continental competitors still receive indirect assistance, the safety net of minimum pricing is being removed. Having put our continental competitors in the position of having a major subsidised cost advantage, we will maximise their opportunity to exploit that cost advantage by taking away the safety net.
Another element in the package to make absolutely sure that Britain gets it wrong is that at the same time we will phase out the quotas. So there will be no element of fair play left within the system.

Mr. Peter Morrison: I listened carefully to what the right hon. Gentleman said at Question time. He will not be surprised to hear that when I went back to my Deprtment I asked for a check to be made. So far as we know, there has been no complaint in regard to Italy or any other European country. As I said to his hon. Friends, I shall be happy to chase up specific complaints and wish to do so at the earliest possible opportunity. But since the Steel Council liberalisation to which I referred in my opening remarks, no complaints of the sort the hon. Gentleman is making have been received.

Mr. Williams: With respect, who does the Minister expect to make complaints other than Britain? What is wrong with the NEDO report? It specifies it. Just having got to a state of parity, BSC will be put at a major, artificial disadvantage. It will have to prune its margin so far to sustain its market share that it will have to trade at a low profit or at no profit. Even if it trades at a low profit, where is the self-sustaining investment to come from, which the Government said that in future BSC would be responsible for providing? They have actually signed a death warrant for BSC.
The Minister made a lengthy speech. He knew, from Question time today, that I was slightly agitated on this issue. No doubt he could have demolished me in his speech, had he had the evidence to do so. He says that there is no evidence. Let me take the article in the January edition of The Engineer. It gives examples from the report of the National Economic Development Office of the sort of subsidy enjoyed by our competitors. It claims that in 1983 the West German industry, which seems to enjoy the biggest indirect subsidies, received £245 million in indirect subsidies, offsetting labour and transport costs. By the way, £74 million of that was for labour in various forms of indirect subsidy. The corresponding figures for France were £120 million and for Italy £130 million. The report claims that evidence is now available to NEDO which suggests that Italy is offering electricity to its steel industry at 20 per cent. below the United Kingdom rate.
If the Minister does not know about these things, why is he not following up the reports, which are readily available to agencies that report directly to his Department? These indirect subsidies will inevitably distort trade. What is the EEC doing about it? What are the Government doing about it? They are doing nothing about it. They do not even admit that it is happening. They do not even seem to know what is going on. Not that that comes as a great surprise to most of us; it is just one more area in which they do not know what is happening.
What is the EEC doing about it? Absolutely nothing. Or if it is doing something, perhaps the Minister will tell


us what it is doing and when it intends to take action. Those who wrote the article in The Engineer spoke to a senior member of the Commission's competition directorate, the people in charge of ensuring that there is equal and free competition between all member countries. What did this senior official say when confronted with the possibility of these indirect subsidies?
If individual governments were to increase indirect aid it would indicate that those subsidies were becoming much more specific and they would then fall foul of the steel aids code. We would step in and stop it".
Fine, that is wonderful. But it will apparently happen only if the subsidies are increased. As long as they are kept at £8 in France, £8 in Germany and £6 in Italy, it seems that the EEC, the competitions directorate and this Government's Ministers are perfectly happy to allow them to continue, regardless of the effect upon the British Steel Corporation.
If there are to be these 25 million to 30 million-tonne cuts, therefore, where will they fall? If the subsidies are taken from our industry, and if our continental colleagues are allowed to keep their subsidies, the answer must be absolutely clear: we are the people who are in line for the cuts. As the hon. Member for Southend, East (Mr. Taylor) said earlier, we have already done more than our share when it comes to accepting job losses.
In the decade to 1984, Britain took 37·9 per cent. of all the job losses throughout the EEC—nearly two-fifths—steel. We lost over that 10-year period 68 per cent. of our steel jobs. The corresponding figure on the continent was 44 per cent. So our steel areas have already been devastated. We already have the black spots, the high unemployment, the empty shells of the old steel works. Now, having suffered most, having had to endure most, with people in steel areas who have already been out of work for two, three or four years, we find that there is a new aid scheme coming in to help the areas of steel unemployment.
But what do we find? We find that under the new aid regime the United Kingdom is not expected to be a net beneficiary. Although the United Kingdom has already taken the lion's share of job losses in European steel, this country is expected yet again to take the lion's share of job losses and is not expected to be a net beneficiary. The United Kingdom's labour force is already in grave imbalance because we tried to accommodate so many job losses through premature retirement and voluntary redundancy. The result is that 70 per cent. of the work force is in the age band 25 to 50. This means that the scope for early retirement to accommodate further redundancies is limited.
Future redundancies will probably have to come from among the young and the younger middle-aged groups — from among those who will not want to have to regard themselves as redundant and forcibly retired at 35 or 40. We find that at the time when this age group will be hit we shall not, according to the aid regime, be net beneficiaries.
The Minister of State said that under the new aid regime the Community wants to adopt an integrated approach to unemployment and redundancy in the steel areas. That is great. Why, then, are the Government allowing British Steel Industries to be wound clown? It was set up in the 1970s to deal with the problem of unemployment in the steel areas, but MacGregor, having chopped the jobs, also chopped the job-creating agency. The axe came down in

1984. British Steel Industries was told that it could continue to recycle the funds that it already had, but that it would get no new funds. Although we are trying to develop an integrated Community approach towards steel closures, British Steel Industries is being closed down and we shall not be net beneficiaries of the aid regime.
The projections upon which these documents are based have been invalidated by events. For example, it was presumed that there would be virtually no change in oil prices, but we have just seen the collapse of oil prices. Has the Department made an assessment of the impact that the change in oil prices will have on demand and the exchange rate and what effect both will have on sales of British steel? The estimate of future demand for British Steel Corporation steel is that it will be virtually static. MacGregor pointed out that two thirds of British steel goes into capital goods and that it directly reflects manufacturing investment. If the demand for BSC steel that is reflected in these documents is valid, it throws grave doubts on the Government's claim about their intention to achieve economic growth, since there is nothing in the documents to suggest that the Government will achieve the rate of economic growth in manufacturing investment to which they have referred. There is nothing to support their projections for steel demand in the United Kingdom.
The Government have been conned. The Europeans must be rolling about holding their stomachs, wondering how the Brits could be so daft yet again. The Government are turning a blind eye to indirect aid which will make BSC uncompetitive, concurring with the removal of the minimum price regime —the safety net to stop unfair competition — and phasing out quotas, intended to ensure a degree of fair shares all round. The outcome of that incredible incompetence is that the United Kingdom will lose, and we will be cheated of steel jobs and capacity.
We are about to enter a free-for-all in the steel market. The House will note that the Minister is falling about with laughter at that prospect. I trust it will be clearly recorded that he thinks that that is funny and does not understand what the Government have entered into. They have started on a European free-for-all steel, but he is unaware of it. His Government are so inept that they are not aware that, in that free-for-all, all the cards are stacked against the BSC.

Mr. Richard Hickmet: I imagine that my hon. Friend the Minister was falling about with laughter at the travesty of the truth that the right hon. Member for Swansea, West (Mr. Williams) has just given the House. The United Kingdom was required to lay off more steel workers than any other country because in 1980 it took 14·5 man hours per tonne of liquid steel whereas in Germany it took something over seven. The British Steel Corporation was overmanned and unproductive because the Government between 1974 and 1979 put the Beswick report on the shelf, and did not have the guts to walk into the steel towns and say, "Look boys, the party's over. We must get production to competitive levels."
During the past five years we have doubled productivity. We produce as much steel in my constituency today with 7,000 men and one steel works as we did in 1981 with 17,000 men and two steel works. That cannot be said of any other steel industry in Europe. I remind those who say that the United Kingdom has cut more steel capacity than any other European country that


since 1980 the French have closed 6 million tonnes of capacity and the Germans 7 million tonnes. The Italians, who have been building capacity all the time, if we believe Opposition propaganda, have closed 5·5 million tonnes. We have closed just under 5 million tonnes. Those are the figures that the right hon. Gentleman failed to give. I do not suppose that my hon. Friend the Minister shouts this when he attends steel councils, but we have capacity in the system to produce as much steel as we did in 1979–80, if we manned up to the appropriate levels.
One of the Government's great success stories has been the recovery of the BSC. In 15 years, the BSC has received 12,000 million good English pounds. In 1980–81, it lost £660 million. Today, it has brought in a £21 million profit in the first half year. That is the first profit since 1972, but we did not hear a word of commendation or congratulations. The right hon. Gentleman merely said that that was all history and that we should not examine it — yes, the previous Labour Government's history. That Government were responsible for those losses. It was not only one of the least profitable and efficient of the major steel industries in Europe, it was one of the least efficient in the world. It was incapable of producing a product of the right quality, on time, at a price which customers were prepared to pay. As I have said, the BSC has more than doubled its productivity in five years.
When one bears in mind the miners' strike and the fact that the cornerstone of Scargill's policy was to close Scunthorpe, Ravenscraig and Llanwern, putting 30,000 steelmen out of work, it is even more remarkable that the BSC has arrived at that position.
Where was the concern of Labour Members then, when Scargill had 10,000 men at Ravenscraig? Did they condemn the attempts to close down the steel industry? Did they say that Scargill's policies would put all those men out of work? No. Why not? Because they did not have the guts so say that. At that time the right hon. Gentleman and his party were in hock to Mr. Scargill. They did not have time for the steel workers then. It cost my constituency £1 million a week to move that coke and ore into Scunthorpe—3 million lorry movements. Yet still it made a profit.
The consequences of the Government's policies and the management of Black Bob, one of the finest steel men in the world, and Bob Haslam, is that we have not only one of the most efficient steel industries in Europe—the right hon. Gentleman did not mention that—but in the world. What other European country produces cheaper steel?
As for the Americans, they have a few lessons to learn about restructuring an inefficient and out-dated steel industry. I suggest that they get in touch with my hon. Friend the Minister of State. Perhaps the President will have him over and he can tell him how to do it.
I welcome the European Commission's decision to promote imports of certain semi-finished steel products. [Interruption.] I can tell my hon. Friend the Member for Southend, East (Mr. Taylor) that the Americans have stopped our steel going in because they cannot compete. They have one of the lousiest steel industries in the world today and they are in breach of their GATT obligations. That is why the European Commission has taken the steps that it has. I am pleased that my hon. Friend and the European Commission are taking reciprocal action.

Mr. Teddy Taylor: I shall be glad if I have the opportunity to say something about the American situation, but meantime will my hon. Friend explain something that I do not understand and he, with his knowledge of steel, obviously does? If we are so much more efficient and better than the continentals, why are we importing more and more steel from the continent?

Mr. Hickmet: When we get rid of the quota system, perhaps that will not be necessary. One reason why we are in this position is the quota system. My hon. Friend the Minister was not congratulated on bringing home a quote of 385,000 tonnes for the British steel industry. Who got that? [Laughter.] The hon. Member for Sheffield, Central (Mr. Caborn) may laugh, but my hon. Friend went to the Steel Council and obtained a quota of 385,000 tonnes. Perhaps, in passing, my hon. Friend will tell me where that quota will be allocated.

Mr. Teddy Taylor: rose—

Mr. Hickmet: I must move on.
The first battle, that for survival, has been won, but the corporation must still achieve full viability. That performance is all the more important as the first phase of the manifest crisis comes to an end. The documents make it clear that state aids are being phased out and that the Commission will watch all state aids, whether direct or indirect. Only those corporations which are viable will survive, and the viable corporation in Europe today is the BSC.
I join hon. Members in commending my hon. Friend for the close attention that he is paying to hidden subsidies and I urge him to keep that matter under particular observation. I also remind hon. Members that it is only as the quota regime is phased out that those efficient steel producers will survive. Five years ago, the vultures of Europe were picking over the bones of the BSC which the Labour Government left to us when they were removed from office, and were hungrily eyeing its decaying carcase. Today, they are threatened by the corporation's success.
Efficiency requires investment. The right hon. Gentleman did not mention the fact that, last year, £194 million was invested in BSC. In 1986, £50 million will be spent in my constituency on a new sinter plant—the largest single scheme approved for 12 years — which will result in higher productivity, lower energy and maintenance costs and improved blast furnace operations. The quality of sinter produced by the new strands will equal the best in the world.
The improvement in the corporation's performance has resulted in substantial redundancies, for the reasons which I have outlined, and I urge my hon. Friend the Minister to ensure that state aid continues to steel closure areas to alleviate the social problems caused. My hon. Friend will know that, since 1983, my constituency has reduced unemployment by more than almost any other: The aid is a vital element in doing that. Will my hon. Friend ensure that non-quota European regional development fund moneys go to steel closure areas such as Scunthorpe, not to Hull, Grimsby or Bridlington, for which other Community funds are available? It is our money. Please let us have it. The social policy is essential to steel closure areas, which have lost many jobs.
I hope that we can knock on its head the myth that Britain has closed more steel capacity than any other


country. 1 should be interested to hear the right hon. Gentleman's answer to the point that I put to him in an intervention. His suggestion is simply not true.

Mr. Ian Wrigglesworth: I am pleased to join the hon. Member for Glanford and Scunthorpe (Mr. Hickmet) in paying tribute to the British Steel Corporation's achievements in recent years. But the hon. Gentleman did not pay enough attention to the damage caused to many people's lives by the shedding of labour in steel areas, which he knows well from his constituency experience. His constituency has had the good fortune, due in part to the state aids to which he referred, to find other employment for former steel workers. In Teesside and other parts of the north, it has been impossible to find alternative employment. The hon. Gentleman should have mentioned the impact of the enormous shedding of labour on people's lives while he paid tribute to the corporation.

Mr. James Tinn: Does the hon. Gentleman agree that it is a pity that the hon. Member for Glanford and Scunthorpe (Mr. Hickmet), who lavishly handed out bouquets to past and present chairmen of the BSC, the Minister and everyone in sight for contributing to the improved position of the BSC, did not say something about the workers, who seem to be blamed for all the previous ills of the industry?

Mr. Wrigglesworth: I am pleased to concur with the hon. Gentleman. The staff of the BSC at all levels—management, middle management and the shop floor—paid an enormous price and made an enormous contribution to the success of the corporation. Since 1980, productivity has doubled from 14·5 man hours to produce a tonne of steel to 6·7 man hours today. That is a remarkable achievement in a short period. Losses of £660 million in 1980–81 have been turned into profit in a short period. Production is 14·6 per cent. higher than it was in 1982.
However, those achievements must be put into perspective. Output is still 30 per cent. below the 1976 level, compared with an average decline in European Community countries of only 10 per cent. British steel output and consumption has suffered from the contraction of our manufacturing base. During the past decade, United Kingdom manufacturing output has decreased by 4·1 per cent., whereas in the EC manufacturing output has increased by 8·3 per cent.
It is not surprising that the demand for the products of British Steel has declined in the way that it has.
I agree with the hon. Member for Glanford and Scunthorpe that the outlook for the corporation in its competitive posture is favourable. It has benefited from the recent fall of the pound against the deutschmark and from the rise of the pound against the dollar. Some 35 per cent. of its raw material costs are dollar-related, so that change will be a double advantage.
However, there are a number of reasons why any proposals to withdraw state aid should be treated with much greater caution than the Government appear to be treating them. First, the exchange rates cannot be relied upon to remain favourable if the dollar's slide ends and the Budget next week results in a return to the discredited sterling M3 strategy, which has been forecast in the papers

in the past few days. When measured against purchasing power parities, sterling is still overvalued against the deutschmark, and my view and that of my right hon. and hon. Friends is that entry into the European monetary system would bring benefit, particularly to BSC, by giving rise to a more competitive position and more stability for the corporation.
Secondly, the fall of about one fifth in the manufacturing capacity has wiped out BSC's customers in many spheres. Falling oil prices, which will halve the contribution of the oil surplus to the balance of payments in the next two years, mean that strategy for industrial competitiveness throughout the whole of the economy is absolutely vital. We all knew that oil would first decline and then run out in the contribution that it was making to the balance of payments. That decline has been brought forward by the recent 40 per cent. decrease in oil prices, and the balance of payments problem is coming down the track at us much more rapidly as a result of the loss of value in oil. That will mean a much greater imbalance in our industry, which has been devastated in recent years. If steel demand and output is to retain its recovery, much higher levels of manufacturing investment in this and future years will be required, and measures must be taken to secure this.
Thirdly, more state aid may be required to ensure that BSC can continue to renew and modernise its equipment and plant, and particularly to concentrate on smaller scale, higher value added and more profitable products. Otherwise, the further threat posed to capacity by the Commission, which wants capacity reduced by a further 24 million tonnes in the next five years, will continue to put pressure on BSC. This may be accentuated by the much higher subsidies given to coal and electricity producers, railways and suppliers in West Germany and France in particular. As the right hon. Member for Swansea, West (Mr. Williams) pointed out, the EEC report shows that subsidies amount to £8 per tonne in West Germany and France, and to £6 per tonne in Italy, but to only £1 per tonne in the United Kingdom. I am not arguing for our subsidies to the industry to be brought up to that level. We need tough action to ensure that all such subsidies are removed, and that we have not only free but fair trade between European countries.
Fourthly, the Community has not spelt out the form of extra social measures for areas affected by steel and coal closures. It has been suggested that the United Kingdom might cease to be a substantial net beneficiary from social measures on steel closures. This would be disastrous in some areas. We hope that it might be because we have borne a considerable brunt of the closures within the Community, and that there are no more to be carried out. It could also imply that the redrawing of the regional assistance map might have affected the eligibility of some areas. Unfortunately, with their usual negative attitude, the Government have objected to multi-annual programmes.
The work of bodies such as British Steel Industries and NCB (Enterprise) needs to be underpinned, consolidated and supported, along with the job creation agencies in those stricken regions that reed to be replaced by proper regional development agencies with the necessary powers and resources to do the job. When the right hon. and learned Member for Richmond, Yorks (Mr. Brittan) was the Secretary of State, that appeared to receive a higher


priority in the Department of Trade and Industry. One wonders whether with his departure it is being returned to the end of the queue again.
The ending of state aids and the phasing out of quotas means that the British Steel Corporation will have to take advantage of marketing opportunities in Europe. As the Minister has said, the corporation is equipped to do that and I would agree with that statement. However, there will have to be new investment in such areas as continuous casting, replacement of old rolling mills, the development of flexible steel making and greater automation. It will mean breaking into the European stock holding operations which on the continent are usually owned by the steel makers themselves. It could mean greater collaboration with European steel makers and it would mean a much greater awareness of the consumer dimension with greater attention given to selling techniques in marketing and product design and innovation.
That is an enormous task for the corporation and it should receive the backing of the Government. I hope that the Minister, in any further remarks that he might make, will give us more reassurance than he has done so far that it will have the full backing of the Government in carrying through what will be a back-breaking task on top of the already back-breaking task that the corporation has carried out.

Mr. Teddy Taylor: We have been given so many complicated papers to discuss in the debate that all we can really do is ask some questions about them. However, as the Minister has rightly said, these proposals have already been approved so there is really not much point in us saying anything at all.
I hope that the Minister will not mind me asking a few questions about what has already happened and on which our views are now being sought.
Bearing in mind that the Government very honestly accepted today that they were alarmed at the decline in our manufacturing industry, does the Minister think that there may be a clue to this decline in the measures that we are discussing on the future of the steel industry? He must know that that is not only a problem in Britain but that it exists on the continent in the EC. Unemployment and job losses are now so horrific that I do not know of any other nation or group of nations in the world where there is such a desert in job creation, with the possible exception of E1 Salvador and Tibet, which do not publish figures.
Does the reason for that fact lie in the steel regime? It is not a question of moving towards free trade or even fair trade but rather of having a protectionist wall provided by guidance prices, strict quotas on oil imports with a specified price for import and a high internal price. The whole principle of high basic internal prices in the EC is a job-destroyer as we find, for example, from the extra £7 a week for food that the average British consumer has to pay as a result of the CAP, which is far more than the Chancellor could possibly offer in his Budget by way of tax relief. We must realise that a basic high-cost economy is not good for Britain.

Mr. Hickmet: Does my hon. Friend not appreciate that the major problem of European steel producers is obtaining a price that is profitable? There is not a high artificial price for steel in Europe.

Mr. Taylor: That is the argument used by the farmers. They say that they find it very difficult to make a living by producing food and selling it at five times the market price. Trying to survive in an economy by taking in each other's washing is not a good basis for job growth. I hope that my hon. Friend the Member for Glanford and Scunthorpe (Mr. Hickmet) will speak up for his steel workers, as other hon. Members spoke up for their farmers on Monday. Is there not a danger that we are working ourselves into the type of economy that will be a sure recipe for destroying jobs, exports and growth?
Will the Minister accept that there is a danger, once again, of the unfulfilled promise? I remember in recent EC debates that the House was told that our problems would be solved by strict budgetary controls. Now, sadly, after eight weeks of the first year of budgetary control, we find that these controls are being abandoned. Does the Minister recall that in previous steel debates we were told that 1985 was the last year for steel aid? The aid would cease at the beginning of 1985, and then it was the end of 1985. Now we find, as the Minister is well aware, that one of the documents describes what is—
the Commission's first ideas on the shape of a new Community steel aids code after 31 December 1985.
My hon. Friend the Minister is well aware that some of these measures will involve the pumping of substantial additional funds into aids for the steel industry.
What does my hon. Friend the Minister mean by a free market? My understanding was that a free market was a market in which there was no dumping and that dumping meant that goods were exported at a lower price than the price at which they were sold at home. My hon. Friend must be well aware that the tradition, and the whole point of our steel policy, is that we dump steel outside the EEC at well below cost.
What is the real objection of the Minister to the attitude of the United States? Does he object to quotas? If so, what the blazes are we doing applying to every other country strict quotas linked to a guidance price by which we tell those countries the price at which they can sell the product? Does my hon. Friend accept that the Americans, with a surplus capacity, had what they regarded as a voluntary restraint agreement with the Common Market and that the Common Market not only disregarded but broke the agreement, and exported much more steel than it had promised?
Does my hon. Friend not think that there is a danger of Britain being a mug, even within the EEC? If we are so much more efficient than the continent, why is so much steel coming in from the continent? Is it purely because of quota? My friends in the steel industry say that it is nothing of the sort.
May I ask the Minister for his thoughts, or the thoughts of the Steel Corporation or, indeed, of anyone on how to achieve the reduction of 24 million tonnes, to which my hon. Friend referred, or of 25 million tonnes, to which the Commission referred? I am not sure which is the correct figure. It seems that 25 million more tonnes of steel capacity must go. Will my hon. Friend give his, or the Commission's, or the BSC's or anyone else's thoughts or expectations, on what part of the 25 million tonne reduction should come from the United Kingdom?
As someone who spent most of his life representing a Scottish constituency, I am afraid that our share of the reduction will mean the closure of the Ravenscraig steelworks, which will have a devastating effect on the


Scottish economy, for which every English and Welsh Member has responsibility. I am sad that tonight, when we are discussing the steel industry, I do not see one Scottish Labour, Liberal or SDP Member. I can forgive the absence of Conservative Members because they do not represent steel industries. Surely the Minister has a duty to tell us where he feels the cut will fall.
I am afraid that, when we look at EEC policies, we see a movement not towards free markets or efficiency but towards more and more protectionism and a guarantee of artificial prices for manufacturing industry. If hon. Members would question this, they would ask themselves why the Common Market, almost uniquely in the world, is not only a jobs desert but a place in which the number of people working is continuing to decline year after year. We want a breath of the low costs, the free competition and the movement towards free trade which helped this country, with 50 million people, to prosper in the past. I am afraid that, so long as we follow this route of bureaucracy, controls, quotas, restrictions and subsidies, which are inherent parts of every aspect of the EEC—whether it is steel, regional or agricultural policy—this nation will continue to decline.

Mr. Richard Caborn: I should like to deal with a matter of great concern to the private steel sector. It involves the operation of the iron and steel employees readaptation benefits scheme in the European Coal and Steel Community. For a considerable time, we have been making representations to the Department of Trade and Industry on the application of readaptation benefits for private steel sector workers. We have had little or no joy from the Department. While BSC has had the agency agreement—I am led to believe that it has been working satisfactorily—many hundreds, if not thousands, of people in the private sector have been unable to take advantage of the readaptation benefit because of the manner in which the Department has interpreted the treaty.
An industrial tribunal document was presented in one case in which a redundant steel worker did not obtain satisfaction from the Department of Trade and Industry. I shall quote some of the correspondence between the Department and the person involved. The tribunal accepted that it did not have the competence to deal with the problem, but some of its findings are interesting.
When Mr. Lewis, my constituent, applied for readaptation money through the company, it contacted the Department of Trade and Industry. The Department sent the company a letter in which it said:
Eligibility for readaptation aid under the Scheme is determined by criteria laid down in the European Coal and Steel Community Treaty. In essence this means that a person is eligible for scheme benefits provided he has lost his job in the steel industry as a result of a permanent closure or reduction in activity in the iron and steel industry…the reduction is one for which the European Commission has agreed to contribute funds. The Scheme is administered by the Department of Trade and Industry and jointly funded by the United Kingdom Government and the European Coal and Steel Community. Since Mr. Lewis was declared redundant as a result of rationalisation within your Company and not linked to any permanent reduction in activity, which is crucial if an application is to be successful, I regret that on the basis of the circumstances outlined in your letter there can be no possibility whatsoever of Mr. Lewis being eligible for benefit under the Scheme.
The tribunal concluded:
It is not, however, for this tribunal to comment further as to the rights of an individual stemming from a European

Community Directive as applied by the United Kingdom legislation, and it may be evident to the advisers to the panics to this case that other remedies may exist. It is, however, within the knowledge of the tribunal that companies are failing to draw fully upon the relevant resources .made available to the United Kingdom under European Community legislation.
Unfortunately, that was one case in which the person did not receive readaptation money.
I wish to quote two other cases, one of which was successful after a long period of discussion with the Department of Trade and Industry. The first case concerned a holding company whose maintenance workers were paid through the holding company but who were servicing the subsidiary companies. All fell clearly within the treaty of Paris. Because these people were being paid by the holding company which technically did not produce steel, they were not allowed to get readaption money. However, after a long correspondence over 18 months between the company, the Department, myself and the EEC, those people were paid.
Five hundred workers are being declared redundant at Phoenix 3 and the argument is that there has been a reduction in capacity. A letter from the Department speaks of that, but its definition in terms of readaptation must be plant taken out of production. That is not the criterion that has been applied in other member states and the private sector employees have lost out.
Of the 500 workers at the Forge masters complex, 150 fall clearly within the scope of the readaptation, but their claims have been rejected because of the Department's advice.
Because the private sector will not fund readaptation courses, those who work in the industry have to wait three or four months before clearance is given by Brussels and then the DTI. That creates serious anxiety, especially for the education service in my area, which has put on special courses for redundant steel workers and is not being paid until three or four months after it takes students on. I hope that the Minister will take that serious problem on board, as it still applies. There are still difficulties at several further education colleges in Sheffield because of the Departmemt's attitude.
I shall go further. Impediments are now being put in the way of redundant steel workers who want to follow courses. It seems that the Department does not want to develop readaptation moneys that are available from the EEC. I accept that the Government have to do some of the funding, but it seems that whenever possible it will turn people down.
The Minister referred to welders in my constituency. We produced and presented to the Department several advertisements for a specific welding skill, but people who had applied for courses in that type of welding were denied a place on grounds of insufficient evidence of reasonable prospects of employment after the course had been completed. There is no right of appeal in that regard. It seems that the Department's decision is final and binding, so there is no recourse for those who think that they should have received readaptation money.
I should like to draw attention to the lack of publicity for readaptation courses. There is little or no coordination. It is only when local authorities, especially education authorities, take the matter on board, as they have in Sheffield, which has involved expenditure in getting advice out to companies and counselling, that


advantage can be taken of the scheme. Even an industrial tribunal is expressing some concern about how the United Kingdom is operating the scheme.
It is very convenient to take the reference period that the hon. Member for Glanford and Scunthorpe (Mr. Hickmet) took. About two fifths of employees in the steel industry have lost their jobs. If we argue on grounds of productivity, however, we should compare like with like. Many of the continentals buy in their services such as a maintenance, whereas the BSC did not. When talking of production per man, we should compare like with like. On that basis, the hon. Gentleman would find that, as before, we compare very favourably. It is clear that more capacity has been cut in the United Kingdom than in any other EEC country.

Mr. Hickmet: Give figures.

Mr. Caborn: Very well. We have had a 68·2 per cent. reduction in the work force. That is 20 per cent. higher than in any other member state's steel industry. Those are not my figures but those of the Financial Times for Wednesday 16 October 1985. The article shows the cuts in capacity as well.

Mr. Tinn: As for the contractors who do essential work but are excluded from our competitors' productivity figures, has my hon. Friend found that there is a growing tendency for the black economy to affect the terms and conditions of those employed by contractors? Does he agree that the matter would bear investigation?

Mr. Caborn: I agree with my hon. Friend. That is very true and it is a serious situation, particularly as regards the conditions. Unit labour costs can be reduced by using the black economy effectively as well.
It is astonishing that the Minister should come to the House and say that there is no evidence, or that he has no evidence, on hidden subsidies by our major competitors within the EC. Either he has not read the files or he has been badly advised by his advisers. Major submissions have been made jointly by the British Steel Corporation and the British Independent Steel Producers Association on energy costs, comparing the United Kingdom with our major competitors within the EC. This has been done not once but several times. Representations have been made on research and development costs and on training costs, especially as far as Germany is concerned. A mass of evidence has been submitted in documentation from all sections of the steel industry in the United Kingdom. Yet the Minister says he wants more evidence. I suggest that he looks at his files. He will find that there is ample evidence, besides the reports and the references that have been made this evening.
I believe that over the latest period the British Steel Corporation has done a first-class job, particularly the employees, and the manner in which Ministers are now approaching the restructuring of our steel industries through the Phoenix development concept is an absolute, utter disaster. Sheffield Forgemasters, which is in my constituency, has unfortunately just gone through a 14-week strike because of sheer incompetent management —and that is not just my opinion but the opinion of a lot of industrialists in Sheffield. That situation has been manipulated by the present Government to take the

running of the industry out of the hands of the BSC, which is a 50 per cent. shareholder and Johnson and Firth Brown, which is the private sector part of the Phoenix development. The Government intervened and forced a management upon that sector and have now created one of the longest strikes in Sheffield on the question of trade union representation. If the Minister allows that to continue, it will lead to disaster for a very important sector of our steel industry—the special steels and the open die forging.
It is hoped that the Phoenix 2 venture which will be launched in April this year will be more successful than Sheffield Forgemasters, but I give this warning: if the Minister treats that Phoenix development with the same contempt as he has shown to Phoenix 3, it is bound to fail. If he does not pay some attention to the financial structure of that development there will be serious trouble. We are talking about the engineering steel sector, which is extremely important.
What is being done is contrary to everything that is going on in Europe and the rest of the world in the development of steel industries to get economies of scale. We are doing the reverse and breaking these down into small sectors. I believe that this is industrially unsound and could well lead to a number of job losses and the loss of major sectors of our steel industry which will be needed if the British manufacturing base is to be revitalised, as we hope, in the not-too-distant future.

11 .40 pm

Mr. Peter Morrison: I can assure the hon. Member for Sheffield, Central (Mr. Caborn) that if there are any iron and steel employees readaptation benefits scheme cases that he wishes me to re-examine, I shall happily do so. I am as concerned as he is to ensure that everything is right.
The hon. Gentleman and I will agree, I think, with all hon. Members who have participated in the debate, apparently with the exception of the right hon. Member for Swansea, West (Mr. Williams), who spoke from the Opposition Front Bench, that the work force and the management of the British Steel Corporation have made enormous strides during the past six or seven years to get themselves in a viable and competitive state that will allow them to have a far better future than might otherwise be the case. I hope that the right hon. Gentleman will want to pay that compliment to them too.

Mr. Williams: indicated assent

Mr. Morrison: I am grateful to the right hon. Gentleman. Although we may disagree on many other matters, I think that it must be recognised that there has been a significant achievement by the work force and the management. I hope that the all-party message that will issue from the House will be a compliment to the corporation as a whole.

Mr. Williams: I have indicated from a sedentary position that I support that sentiment. The Opposition congratulate the industry on the progress that it has made. I said earlier that it has made itself competitive with the rest of Europe. My purpose was to show that what has been achieved might be thrown away by what I regard as inept handling of negotiations and not to denigrate what has been achieved.

Mr. Morrison: I understand that the right hon. Gentleman would wish to make political points, but I am glad that we can agree on what has been achieved by the corporation.
The hon. Member for Sheffield, Central referred to the phoenix projects. I would not expect him always to agree with the course on which we have been proceeding, but I listened carefully to his remarks and I assure him that I wish to see them succeed every bit as much as he does.
My hon. Friend the Member for Glanford and Scunthorpe (Mr. Hickmet) made many positive points in his contribution. He described the industry as competitive and viable and said that that would ensure the jobs of the future. If the markets so turn out, there may be an expansion of the number of jobs in the industry in future. That is precisely the aim and ambition of the Government and the corporation. We wish to ensure that we have as successful a steel industry as it is possible to have.
My hon. Friend the Member for Glanford and Scunthorpe referred to ERDF funds, which may be made available to his constituency. I listened carefully to what he had to say and I hope that I shall have more definite news in the near future.
The hon. Member for Stockton, South (Mr. Wrigglesworth) paid tribute, like the hon. Member for Sheffield, Central, to the workers and management of the corporation. I agreed when he said that the task ahead of them, despite the solid foundations that have been built, was a demanding one and a major challenge to the corporation. He asked whether we had considered the effect of the reduction in oil prices, as did the right hon. Member for Swansea, West. The answer is that we have. We think that it will be good news, but I should not like to over-estimate that. Our current estimate is that the result will be rather more on the margin than a surge. We shall have to see what happens in the oil price market. I think that the outcome will be on the plus side rather than the minus side.
The hon. Member for Stockton, South referred also to regional policy. I can assure him that my right hon. Friend the Secretary of State puts as much emphasis on regional policy as his predecessor, my right hon. and learned Friend the Member for Richmond, Yorks (Mr. Brittan). I know that the Secretary of State is planning to visit the north-east shortly. Of course, my right hon. and learned Friend had the advantage of having a constituency in the north-east, which, of course, he continues to represent.
The point which the right hon. Member for Swansea, West made about subsidies—

It being one and a half hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted business).

It was agreed to.

Resolved,
That this House takes note of European Community Documents Nos. 8293/85, a communication by the Commission to the Council concerning the organisation of the steel market after 1985; 9300/85, a communication by the Commission to the Council on the introduction of a system of production quotas under Article 58 of the Treaty establishing the European Coal and Steel community after December 1985; 9301/85, a communication by the Commission to the Council concerning rules on aid and financial transfers to the Community Steel Industry after 1985; 8779/85, proposals for Council Decisions concerning contributions to the European Communities to finance measures connected with the restructuring of the coal and steel industries; 5194/84, a communication by the Commission to the Council on the General Objectives for Steel 1985; and 4493/86, a proposal by the Commission for a Council Regulation establishing quantitative restrictions on imports of certain products originating in the United States of America; and welcomes the agreement by the Government in the Council of Ministers to a further limited period of European Coal and Steel Community market organisation measures beneficial to the United Kingdom and to the ending of most forms of state aid to the Community steel industry.

PETITIONS

Sunday Trading

Mr. Ivor Stanbrook: With your permission, Mr. Deputy Speaker, I beg leave of the House to present a petition from residents of my constituency in which they refer to the shops Bill, now before Parliament, and seek to request the House that that Bill be not passed in its present form in so far as it proposes the total deregulation of the law regarding shop hours.
The petition concludes with the words:
Wherefore your petitioners pray that your honourable House do maintain legal limitations on Sunday trading to ensure that the special character of Sunday is protected. And your petitioners, as in duty bound, will ever pray, et cetera.
The petition is signed by more than 2,200 of my constituents. I totally agree with them.

To lie upon the Table.

Mr. William Cash: With your permission, Mr. Deputy Speaker, I beg leave to present a petition. I have the honour to present the petition on behalf of my constituents who are residents of Stafford. The concluding words of the petition are:
Wherefore your petitioners pray that your honourable House do maintain legal limitations on Sunday trading to ensure that the special character of Sunday is protected. And your petitioners, as in duty bound, will ever pray, et cetera.
To lie upon the Table.

Mr. David Sumberg: With your permission, Mr. Deputy Speaker, I beg leave to present a petition opposing unlimited Sunday trading as proposed by the Shops Bill. The petition is signed by 700 of my constituents. It concludes with the words:
Wherefore your petitioners pray that your honourable House do maintain legal limitations on Sunday trading to ensure that the special character of Sunday is protected. And your petitioners, as in duty bound, will ever pray, et cetera.
Although I see little practical alternative to the Government's proposals to make our Sunday trading laws consistent with both logic and common sense, I pay tribute to the sincerity, conscience and industry of those who organised and signed the petition, and who have enabled me to present it.

To lie upon the Table.

Elderly Persons (Rest Homes)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Sainsbury.]

Mr. Christopher Chope: I am grateful for the opportunity to have a debate about the financial arrangements for people in registered rest homes for the elderly. I know that I am not alone among hon. Members in being concerned about the matter. My hon. Friend the Member for New Forest (Mr. McNair-Wilson) wishes me to associate his name with some of the concerns which I want to express.
I appreciate the keen interest which my hon. Friend the Minister has taken in the subject since taking over responsibility for it. May I thank him in particular for the way in which he has listened to the representations of my constituents? In January he visited Southampton and, after meeting several residents at the Brookvale care home, he had a discussion with other rest home owners, a consultant geriatrician, general practitioners and nurses about the problems of residential care for the elderly. Later the same day he opened a new rest home which I am pleased to tell him is prospering, although it is charging fees greater than those who are on supplementary benefit can afford. More recently, my hon. Friend had a follow-up meeting lasting about an hour with two registered rest home owners in Southampton. If he paid the same attention to every constituency, I do not think he would have time to do anything else. I am most grateful for his concern.
The Conservative Government have an excellent record in extending care in the community, and the expanding national network of residential and nursing homes in the private sector is testament to this. The passing of legislation to improve the standards of care in these homes has ensured that those who look forward to spending the later years of their life in residential care can do so with confidence. The national picture is fully reflected in Southampton and Hampshire. In Southampton, the success of the programme of extending care in the community is such that, despite increasing numbers of elderly, and particularly frail elderly, there are now fewer on the waiting list for long-stay hospital care. My hon. Friend will know, however, that one does not seek a debate on the Adjournment merely to praise the Government but to draw attention to particular problems.
The first problem to which I draw attention is the position of those who were in receipt of supplementary benefit in respect of their rest homes charges at 28 April 1985. When my right hon. Friend the Secretary of State first proposed a new structure of national limits for the residential care and nursing home sector on 29 November 1984, he said,
These new limits will be designed to reflect the varying cost of providing different types of care. There is no question, however, of elderly, handicapped or disabled people being moved out of their existing accommodation, and their position will be protected." — [Official Report, 29 November 1984; Vol. 68, c. 1098–99.]
In circular LASSL 86(1), issued on 14 January 1986, there is confirmation that the level of charges being met in a person's supplementary benefit before 29 April 1985 will be maintained indefinitely where the person is over pensionable age. I welcome that, but it does not meet the problem of rising costs and charges. Most residential rest


homes have had to increase their charges since April 1985 or, if they have not already done so, will soon have to. Who is to pay the inceased charges?
The DHSS will not if the charges are already above £120. By definition, the residents do not have the means to pay the extra and even if they did this would be offset against their supplementary entitlement. I know of several proprietors of rest homes in Southampton who will have to take a crunch decision soon — next month is the crunch time—about whether to waive increased charges for the residents in the category I have described or ask those residents to leave. Surely if my right hon. Friend is to be consistent with his pledge to "protect the position" of such residents, he should be willing to allow increased supplementary benefit in line with the retail prices index. He should not rely upon the charity of the home owners, and should remember that because the residents do not enjoy security of tenure both they and their relatives are extremely worried about what may happen.
The second problem to which I draw attention is the position of those who were resident in rest homes at 28 April 1985 but who were paying privately and whose means subsequently fall to such a level as to cause them to qualify for supplementary benefit. Many of those who enter residential care use the capital released from the sale of their homes to meet the costs, but even £30,000 from the sale of a house pays for only three or four years in a rest home at £150 per week. These people expected that, once their capital was depleted, they would be in the same position as anyone else who qualified for supplementary benefit. Surely the pledge given by my right hon. Friend to which I have referred should extend unequivocally to these residents as well.
In this context I welcome the contents of paragraph 5 of the circular of 14 January, which states:
For those claiming supplementary benefit after 29 April 1985 the new system of national limits applied straight away. But Ministers have decided to introduce a new provision to help some long standing residents in residential care homes who did not claim supplementary benefit until after 29 April 1985…Where application of the new limits could produce exceptional hardship the Secretary of State has the discretionary power to extend to an individual the benefit of transitional protection so that he could receive the same rate of benefit as he would have received had he claimed before 29 April".
I hope that much greater publicity will be given to this very welcome concession by the Government, because I know that the problem has been a cause of concern to many. I have met many residents and their relatives who are still concerned, however, about what will happen when the money runs out. I doubt that the discretionary power will allay all their worries and concerns. I find it hard to contemplate a situation in which my right hon. Friend would choose not to exercise his discretion to extend transitional protection. If I am right in that, why cannot he go the whole way and guarantee that, in the situation that I have described, the transitional protection will be extended?
The third problem on which I seek my hon. Friend's comments is the rigidity of the limit of £120 a week on supplementary benefit payments for residents in residential rest homes for the elderly. In most homes in Southampton this limit is well below the fees charged to those who pay privately. I imagine that £120 a week is probably too much for a pensioner who is up and about and fully in command of his faculties and who does not qualify

for attendance allowance. Such a person should not, perhaps, even be in a residential rest home—at any rate, not at the expense of the taxpayer.
However, at the other end of the scale there may be a nonagenarian who qualifies for the full attendance allowance, who is very frail and who is incontinent. For such a person, living in a centrally heated, single room with full board, 24-hour care and free laundry, £17 a day is a bargain. It is clearly far below the reasonable cost. One needs only to consider the cost of care in a long-stay hospital. It is £48 a day. Therefore, £17 a day is very much on the low side where a very considerable degree of care is required.
I do not underestimate the problems involved in having separate levels of supplementary benefit entitlement, depending on the extent of the infirmity and the degree of care being provided. But the present system, particularly now that the attendance allowance payments are taken into account and set off against supplementary benefit, discriminates against the very people that we should be most eager to help. My hon. Friend saw some such people on the occasion of his visit to the Brookvale care home in Southampton.
The fourth problem is the one of topping-up payments. If a person is below pensionable age and a home's charges exceed the supplementary benefit limit a local authority is able to top up the balance above supplementary benefit. The same principle does not apply, however, to a person who is a pensioner. I am sure that many local authorities would much prefer to top up a payment rather than have to provide home help services and meals on wheels. A district health authority might also be willing to make a topping up payment because it thereby saves on district nursing services. In Southampton, in the light of a recent decision to remove payments for incontinent aids, it would mean a saving of between £40 and £50 per resident per month if a person moved into a residential rest home.
There is also a problem about topping-up payments by relatives. I hope that in his reply this evening my hon. Friend will spell out clearly what those rules are. I have spoken to the officials in the supplementary benefit office in Southampton. They are in a state of confusion. The result is that some of the decisions that have been handed down seem to be wrong. I understand that under the regulations it is possible for relatives to top up payments, but I do not believe that that is the general understanding. I look forward to hearing what my hon. Friend has to say about that problem.
The fifth problem concerns the inflexible arrangements which apply to the categorisation of residents. A nursing home resident can receive between £170 and £230 per week from supplementary benefit, yet I have had constituency cases of individuals who would clearly qualify for nursing home provision but who would prefer to stay in a residential rest home where they have already spent many years, where the environment is familiar and the standard of care is as high as they would wish or need. My hon. Friend wrote to me about one such case on 28 February. The 89-year-old lady has charges of £180 per week. When I wrote to my hon. Friend he suggested that, in view of her disabilities and the high degree of care she needs,
it may be that she should now be accommodated in a nursing rather than a residential care home. The limit for a non specialist nursing home is £170 per week. This higher limit could not be paid for"—


this particular lady's—
present accommodation unless the home were jointly registered also as a nursing home.
But joint registration of this home is not a practicable possibility. There are planning problems and the additional facilities which the owner would have to provide would only be worthwhile if all her residents were in need of the level of care provided in a nursing home. The owner does not wish to register as a nursing home and the resident does not wish to move to a nursing home.
If a pensioner resident suffers from disablement but had become disabled before reaching pensionable age, the maximum supplementary benefit payable is £180 rather than £120, provided of course that the home is duly registered for the elderly and physically disabled. Yet if a pensioner resident becomes frail and disabled in old age, the limit is fixed at £120.
Circular LASSL 86(1) explains:
This distinction is intended to avoid ambiguity between those suffering from substantial and permanent disablement and those simply becoming frail in old age.
That is Civil Service newspeak of the worst sort. If an 85-year-old bedridden amputee is frail and incontinent, he is disabled. Why should the cost of looking after him be deemed to be £60 a week less, if he was disabled at the age of 65 rather than 64? That is one of the worst anomalies.
There is a similar inflexibility in the assessment of those with mental disorders. Senile dementia is not apparently classified as a mental disorder, although its symptoms are often similar. The amount of care needed to look after someone with it is a great deal more than that for an ordinary old person. Yet supplementary benefit allowances are no different.
I know that my hon. Friend does not have responsibility for incontinent aids, but does he agree that it is desirable for health authorities to provide incontinent aids at no cost to residents in local authority, private and voluntary residential rest homes? I can understand why such facilities should not be provided to nursing homes because by their definition they are meant to provide full care and treatment, including all nursing services. But at a time when resident rest home owners are being pressurised from all sides, it is most unfortunate that in the Southampton health district the provision of such incontinent aids to residents in residential rest homes has been withdrawn by the health authority.
In a masterly understatement in a letter to me, my hon. Friend said:
We do not regard the present arrangements as immune to change if the need can be shown.
I hope that he will show that he has thought further about the possible ways in which the system can be improved and changed, and that he will not delay in putting right some of the present shortcomings which threaten to discredit an area of Government policy for which there should be only properly great praise.

The Parliamentary Under-Secretary of State for Health and Social Security (Mr. John Major): I have listened with care and interest to the wide-ranging speech of my hon. Friend the Member for Southampton, Itchen (Mr. Chope). In the time available I shall respond to as many of his points as possible. I welcome the opportunity

to debate this important issue, and understand and sympathise with many of the concerns that he has expressed. It is characteristic of his assiduity on behalf of his constituents that he has pursued this matter extremely vigorously over recent months. I have no objection to that, although I have frequently been on the sharp end of his activities, because few topics are more pressing to those concerned with social welfare than the provision of care for our growing numbers of elderly, especially very elderly, people. There will be an increasing number of them in society year upon year for as far ahead as we can see.
First, I wish to look at the background to the present circumstances since it is important that it is properly understood. There have been radical changes in the past few years, which have transformed the whole character and scale of the provision of help for the elderly. Historically, many people who could no longer cope on their own have gone into local authority homes, or local authorities have sponsored them in private or voluntary homes. Many others have been cared for in the long-stay geriatric wards of our National Health Service hospitals.
The new and welcome feature of the 1980s has been the substantial opening up of the private and voluntary sectors to many more people, who have been able to exercise choices previously open only to those with substantial private resources. That has occurred because of the substantial availability of high rates of supplementary benefit, which has become a major source of funding, enabling many people to be cared for in the private sector. The figures show beyond dispute the rapidity of this change. In 1978 supplementary benefit helped 7,000 people to pay their fees in residential care and nursing homes. By 1984 the estimated figure was not 7,000 but 42,000, a sixfold increase in as many years. Expenditure too has risen sharply. The figures have been often quoted but they bear repeating. In 1978 expenditure in this area was £6 million. By 1983 it had soared to just over £100 million and the estimated figure for 1984 was £190 million. It will undoubtedly be higher in 1985.
In most ways, that growth has been beneficial. But the system was open to exploitation and abuse; and it had other features which have caused widespread concern. In the longer term, we would very much like to find a way of restoring a greater measure of responsiveness to individual need. My hon. Friend dealt particularly with that point.
More immediately, I must reiterate what I have said. We simply could not have allowed the growth that was continuing prior to April 1985 to continue uncontrolled, in the interests both of the taxpayer and of the elderly residents themselves. My hon. Friend will know that the numbers of elderly in the population are increasing, and they must be cared for. We entirely accept that and are anxious to seek the best ways of caring for them in their interests and those of the taxpayer. Therefore, it is right that we should make a comprehensive attempt to address this issue, not simply fudge it by paying ever-increasing amounts of benefits, as some people have urged on us. We need to take a comprehensive look at residential care and that is what we are seeking to do in a number of surveys that we have undertaken.
As a first step, in April last year we introduced a new structure for the payment of supplementary benefit to people in homes. Our aim was to regain control of expenditure and to relate benefit levels to the type of care


and the cost of care provided. The system of limits that we introduced was intended to allow reasonable charges to be met on the basis of the registration categories set out in the 1984 Act. The limits were set by reference to the best information that was available to us and for residential care homes they initially ranged from £110 to £170. I should mention that the limit for Southampton before April 1985 was £110, the same amount as the limit we set for the elderly under the new structure that we introduced in April.
My hon. Friend asked about the position of people who were already in residential care homes when the changes were made. We have provided, as he acknowledged, extensive protection arrangements for people in homes who were in receipt of benefit when the changes were made and who would otherwise have been adversely affected. Those over pension age will continue to get their existing benefit for life or until payment under the new rules becomes more favourable for them. The new limits will normally apply to those who were in homes but not claiming benefit before April 1985. However, as my hon. Friend acknowledged, in cases of exceptional hardship the Secretary of State has discretionary power to treat certain long-standing residents in a similar way to transitionally protected claimants.
My hon. Friend asked particularly about the vexed question of topping up payments, which he believes is being misunderstood, and I believe that he is correct. He asked me to spell out the position. I assume that he was referring to payments made by relatives or charities to meet the difference between the supplementary benefit payable and the homes' charges. Such payments are not —I repeat not — taken into account when benefit is assessed. The guidance in the S manual advises local offices to
disregard payments from charities, friends or relatives specifically intended to meet the balance of the charge to the extent that they are used for that purpose".
That is entirely clear, and I hope that none of our local offices will misunderstand it.
But we recognised that this was the first step. When the measures were introduced, we promised a full programme of monitoring and research. We did so partly because we had an early sense of some of the difficulties to which my hon. Friend drew our attention this evening. One result of the initial feedback was an increase in the limits in November 1985. The residential care home limits were increased by £10, giving a range from £120 to £180. The limits for nursing homes, which are higher because of the more intensive care provided, were also increased by just more than £30 a week. Those substantial increases show our willingness to listen and to take action when we believe it to be necessary.
As my hon. Friend may know, we are in the process of reviewing all the residential care and nursing home limits. I listened with special care to what he said about the difficulties and problems faced by residential care home owners and residents in his constituency. We shall consider carefully the comments that he and other hon. Members have made during the review.
As an integral part of the review, we have commissioned a firm of independent management consultants, Ernst and Whinney, to undertake a wide-ranging inquiry into the costs incurred by homes of all sorts. The review will also draw on our monitoring of the arrangements since they were introduced last year,

information from our local offices and representations from interested organisations and individuals. Any changes shown to be necessary following that review will be introduced in July this year at the time of the general benefit uprating. Although there is a tendency to think of £120 as the limit for the elderly, assuming that a home is registered to care for them., a range of higher limits is available to residents in residential care homes that stretches between £120 a week and £180 a week.
As to the longer-term future, most people would agree that there are inherent difficulties in the present system of public funding in this area. The present duality, with local authorities and supplementary benefit as major purchasers and providers of care, has caused problems administratively and, in some cases, for the people whom the system is supposed to help. Our aim is to draw together the two disparate strands so that when someone needs care, it can be provided simply and at a reasonable cost to public funds.
The first step towards that was made with the joint central and local government working party, which was set up in late 1984 by my right hon. Friends the Secretaries of State for Social Services, for Scotland and for Wales. The working party examined the scope for improving collaboration between the Department and local authorities over financial support for residents of private and voluntary residential care homes.
In its report, issued last year, the working party made two major recommendations. The first deals with an issue which I know worries my hon. Friend—the assessment of supplementary benefit claimants' need for care. I recall clearly the remarks of Mrs. Armstrong and the consultant geriatrician when we met in Southampton about a month ago. The working party recommended that we should explore the feasibility of extending local authorities' existing multi-disciplinary assessments to anyone in residential care claiming benefit and of local authorities advising DHSS offices on appropriate payments. We have agreed with the local authority associations that we should carry out pilot studies to test the proposals. They will take the form of a dry run and will not affect anyone's benefit. The pilot studies will be conducted by the social policy research unit at York university. The aim will be to explore how the arrangements would work in practice and to identify any new problems and, I trust, their solutions.
The second recommendation was that we should seek long-term solutions to the problems created by the existing parallel systems of support. We have also accepted this recommendation. We and the local authority associations have agreed to set up a further joint working party to consider ways of harmonising financial support for people in residential care homes. The first meeting of this working party will be held at the end of this month and it is expected to complete its work within a year.
As I hope my hon. Friend will agree, we therefore have a substantial programme m hand for reviewing the financial arrangements for people in residential care homes and the problems that he mentioned. In the short term, we are reviewing the current supplementary benefit limits, and in the longer term we have the pilot studies on the assessment of supplementary benefit claimants' care needs and the joint central/local government working party.
A related issue is the dual registration of homes. A home registered with the local authority as a residential care home may also be registered as a nursing home with


the district health authority. We call this dual registration. Indeed, the home has to be so registered if it is providing nursing care of the kind proper to a nursing home. Residential care homes themselves are classified for registration purposes according to the main categories of dependent people, such as physically disabled or mentally disordered people, or elderly people, without attendant, exceptional disability. As I mentioned earlier, different rates of supplementary benefit apply to people in those categories, providing that they are registered in homes that are properly registered to care for them.
I hope that from all this my hon. Friend will see that we are very carefully considering the financial arrangements for residents in registered rest homes for the

elderly. I emphasise that a home can be registered for more than one category, and this is being made clear to local authorities, as the registration authorities, in a circular that is about to be issued, a copy of which I shall put in the Library. A home may therefore be classified to take physically disabled as well as elderly people. I hope that what I have been able to say in the few minutes at my disposal this evening will be of some assurance to my hon. Friend, to the many people who are running residential care homes and, above all, to the many residents of such homes, who may have had some uncertainty about the present arrangements.

Question put and agreed to.

Adjourned accordingly at seventeen minutes past Twelve o'clock.